TKH Group Aktie

Good morning, everyone here in Amsterdam, the Okura Hotel for the presentation of the half year results. Also a warm welcome to everyone in the audience of the webcast. Before I go to the -- I have to move this -- to the presentation, I'd like to point out to the cautionary note regarding forward-looking statements. Yes, we have a nice key messages, and we can start with the fact that we delivered strong results -- a strong set of results, both in the half year and especially in Q2, with an organic growth of 18% in turnover and 67.5% in result.

What we see is that the Vision Technologies performed very well and the electrification performed very well. Underlying performance is related to high market demand in Vision Technology. What we saw in automated machinery is that we are still impacted with a lower order intake, and that has mainly to do with geopolitical circumstances and led to -- that led to postponement of orders. I have to mention that we have a very good pipeline of orders and we are looking forward that these orders are coming in the coming quarters.

What we saw is that within electrification, we had an especially good performance in the Eemshaven, strong improvement in output and also the yield improvements. But also in Onshore energy, we saw that there was a very good performance, very high growth rate due to the fact that we have a very good order book there and also that the installation of the projects of the cable is running at a much more smooth trajectory. The separation process is well on track. Important strategic development within the TKH Group, of course, the separation of the Automation and the Electrification activities, we have come in with a new segmentation to address the real, the pure electrification activities and then the other activities within electrification. I believe that's a good -- helps the transparency and information stream to make the right analysis of our business.

What we also did is that we upgraded the -- or replaced the forecast for Electrification into a medium-term guidance. And in that medium-term guidance, we upgraded the organic growth, and that has mainly to do with the fact that we see a better performance, higher demand in the Onshore Electrification activities.

I go in detail now to the half year results, Q2, especially important to mention, besides all the growth rates here, is the order intake, I believe, a very good development of the order intake -- more than EUR 500 million, and we have to take into account that the order intake in the automated machinery division was really low. So when that comes back, I believe we are really performing really well. And what is also good to see that not only the comparison towards 2025, showed very nice growth figures, but also the comparison to Q1 '26 showed a very good performance.

Yes, then the half year performance. I mentioned that we are quite happy with a 40% organic growth, very nice development of the EBITDA plus 43.5%. We have a kind of stable added value and a quite high added value. And I'll come back later to that, especially when we look into the separate divisions. What is important to mention here is the innovation rate. It's still a quite high innovation rate. We have seen years where we have been above 20%, but taking into account very high organic growth and we still keep up with an innovation rate of above 16%. I believe we are doing a quite good job.

And to remember you that the innovation rate is a really growth engine to gain market share. And I believe we are doing a quite good job there in several areas where we have seen that the market share increased. Also, important to mention here is the award we get -- we got from EcoVadis -- we are with VMI in the top 1% of companies in respect of the sustainability rating, very important building stone for TKH in addressing our market and desires of our customers to be a very sustainable company, but not only sustainable as a company, but also especially sustainable with our technologies, that can help our customers to improve their sustainability performance.

The separation activities are on track. And yes, we made good steps, especially with the preparation for the EGM to get a shareholder approval for the proposed separation. We are doing that on a voluntary basis. We are not yet meeting the criteria that it's an obligation. But we consider the views and support of our shareholders is very important for the separation process. I move into the different divisions. I would like to mention here with the Vision Technologies, especially the high added value. We continue to perform on a very high added value in this activity, which again proves the technology leadership we have here and in that respect, the performance and rewards we get from our customers to get a good margin.

And that translated now in the first half year in a return on sales of more than 20%. And very healthy activity, especially also if we look at the order book, which increased substantially. And that means also that for the second half year, we are positive in respect of the expectations and the strong order book is a good supporting.

Automated machinery, I believe is still a very good performance. We saw the turnover coming down was not a surprise. Based on the order intake, which has been running at a lower pace in the last 3, 4 quarters. As I mentioned before, we see a very good order project pipeline, but postponements by many of our customers, we can come back later if you have more questions about that, but the return on sales is still at a good level of 16%. It is a cyclical activity, but keeping up the EBIT margin, the return on sales at 16%, I believe, is a very good job.

We see here, of course, that the order book came down substantially. And we need in that respect, also additional orders to get our performance also in relation to 2027. What is very good? We didn't lose any market share. So that is, I believe, a key message here and that the long-term drivers for the high-end equipment that we have in our portfolio had a need for greater production efficiency, increased sustainability and especially also the higher levels of automation are really positioning ourselves at the key trends and the technology advantages that we have.

Electrification, a very nice step-up in the return on sales. We are reporting now, especially also the EBITDA margin, which is let's say, common practice in the cable industry with our peers. There we see a very nice EBITDA margin already of 12.6%. With respect to the medium-term guidance of 19%, there is still headroom for growth, and that will especially happen through the further utilization of the capacity that we have in our hands. What we do also for the first time is split up the turnover for the 3 areas within the electrification activities. And again, this is the pure electrification activities consisting of 4 companies in the TKH Group.

Very substantial growth within the offshore energy, which confirms the higher utilization rate, good improvements of the yield in the factories. We solve the majority of the issues. We did several upgrades. And again, that was mainly fine-tuning of the technology to get where we wanted to be. And yes, again, the outlook is also quite positive for the offshore wind with about 92 tenders we are participating in, with a total demand of more than 14,000 kilometers.

Within Onshore Energy, it is important to mention the EUR 1.4 million framework agreements that we have signed. We cannot put that into the order book. So the order book is 500 -- a little bit more than EUR 500 million, but it does not include, of course, the framework agreements. And -- but it gives you a good outlook, a good fundament to value, let's say, what the potential is of the onshore business also for the future. Specialty cables did a quite good job. The German market was really affected with much lower investment levels in the capital goods market, but they still were able to increase the turnover with 2%.

And yes, with respect to the outlook, we see that the improved operational performance recorded during the first quarters are -- of '26 are expected to continue in the second half of 2026. Then for the first time, we report the other business, which consists for about 75% of digitalization activities. We saw a significant growth -- organic growth of more than 15% and a very big step-up in the profitability, which is mainly being the contribution of our fiber production activities that are located in China with a very good performance of demand in the data center business and of course, all the AI developments that you see where fiber optic is the product to do the data transmission.

And also interesting to mention is the demand in the defense business. We saw also a big reduction -- substantial reduction of the cost. In the activities last year, we closed down the activities of the fiber manufacturing in Holland, moved the capacity to Poland, and that helped us to have a much lower cost base and that also supported the improvement of the return on sales.

Yes, the medium-term guidance, I already mentioned that we see a small upgrade of the organic turnover, and that is based mainly on the outlook for the medium voltage and high voltage cables for the onshore business. And what is important to mention here is the last 12 months development of the turnover towards more than EUR 600 million turnover, which is a different reference base as we had -- when we communicated the targets at the Capital Market Day in September last year.

That was my last slide, and I'd like to hand over to Elling.

Thank you, Alexander. Good morning, everyone. It's my pleasure to spend a few minutes on the financials of the first half. First of all, the segmentation. We discussed the segmentation at the Capital Markets Day in September '25, where, of course, the transition from the smart segments, which we had in the past towards the Automation and Electrification segment was applicable. Full year '25 was still reported under the -- what you see here on the left part of the sheet. The smart division, smart manufacturing and smart connectivity segments. But as of this year, we will be reporting -- confirm the right part of the sheet here, automation electrification and indeed, also listening to the feedback of some of you.

We have grouped all the to-be-divested activities in a segment called Other. So therefore, you have a very clear performance indicator on how the business is running in the automation and electrification segments also when you want to compare them to peers. It is also -- of course, we don't like that you have a lot of work to do with our reporting segment, but we facilitated as well as of this morning. The last 3 years, KPIs and reporting have been made available on the website of TKH along the new segmentation, as you see here on the right side. So you can update your models accordingly.

And basically, the step from the left to the right had to do with the fact that we grouped, as I mentioned earlier, under the segment Others, those elements, which are considered to be divested. Digitalization was already in that basket, but as you see, some other smaller activities have been entered into this segment as well.

Then moving on to the top line and the developments in a geographical way. If you look at the sheet here, Europe still remains roughly 60% of overall revenue. But you see, of course, the Netherlands creeping up a little bit. That's on the back of the high growth of the electrification business, which is very much centered in the Netherlands and some countries around us. Slight increase in Asia. That's on the back of further activities of our vision activities in Asia and North America, a substantial reduction as a share of the total revenue, and that's due to the fact that especially on the tire building machines, there was less revenue base in North America than it was in the first half of '25.

Looking at the P&L, quite a couple of things, of course, already passed in the presentation of Alexander. But I just want to highlight a few things. If you look at the organic growth in the first half, 14% on top line, we had about EUR 16 million or 1.9% of revenue in the category of divestments. Alphatronics and Divtron were divested. And they are also, of course, already in the adjusted figures in the other segment, just to clarify that.

And if you look at our added value, Alexander mentioned, slightly lower than the first half of last year. We have seen that electrification has grown its added value. So that is an important step. And as electrification has become a more important share in the whole, it means that it puts a little bit of pressure on the group added value despite the fact that, that segment, as I mentioned, saw an increase. Then if you look at the EBITA a 43.5% increase for the first half organically. I think that's fairly well. Also, operational costs are well under control. So from the point of view, a return on sales and EBITA at 11.9% is a good level, I think.

We had some one-off costs in the first half. As you are all aware, we are in full swing for the separation of electrification that also brings some one-off expenses in the first half as well as some of the divestments which we did in total of EUR 4.5 million. If you look at the line result of associates, the proceeds or the net effect of the divestment of Alphatronics resulted a small EUR 3 million in one-off gain. And on the financial result, we had seen lower interest rates and a slightly lower average debt compared to the first half last year. That helped a little bit. But foreign exchange effects basically caused the delta between first half '25 and first half '26. If you look at our tax rate, just over 24% as a normalized effective tax rate, also something -- when you look at your models for '26, a little bit to -- in that same basket, we will probably end.

On the balance sheet, of course, working capital is always a big clear topic. We have not been able, compared to the start of the year to reduce the working capital as a percentage of revenue. It's at 18.3% and basically in euros, it increased by just over EUR 40 million, and that's in line with the actual growth organically of the group. Despite the fact that it's a slight increase, it has some, I would say, qualitative aspects to this as well because due to the fact that the order intake, especially in automated machineries, VMI has been low. It also means that the down payments have been substantially lower than what we have seen in prior periods.

And that is causing, in the end, an increase. It's a net effect on one side improvements within some of the working capital items, but the lack of the down payments in the end brings the working capital up compared to where we started the year. And mind you, we, of course, always have a higher working capital at the middle of the year than at the end, and that's also what we are aiming for '26. Working capital leads to a further explanation on the net debt, just over EUR 500 million, according to the bank covenants or leverage rate, we are at 1.8, substantially different than the 2.6 where we were last year, of course, on the back of the improved results, this is a clear positive development.

If you look at some of the main items here, cash flow from operations, you will see it in the next sheet in more detail, about EUR 95 million. But I think also here, the CapEx programs, both in tangibles and intangibles, close to EUR 30 million each in the first half. We expect this to be slightly lower in the second half. And of course, an important ticket as well has been the dividend payout in the second quarter. This leads basically to also the free cash flow as presented here. Also, here on the back of the swing in the working capital, we see that H1 is greatly impacted by the change in working capital.

In the end, we end up a conversion of 15% low. But also here, we expect the second half to improve. And on the right side, you see, again, an overview of how working capital ratio develops during the last couple of years. So far, the short explanation, the outlook. And again, I have to be a little bit different than the couple of years before where we had a much more extensive outlook, basically almost going at line item. We are not able to do that. It's not that we don't want. But in the current process we are in, we have a lot of restrictions in terms of guidance going forward as we are in a dual track process. the electrification activities.

So basically, what we say here is that we reiterate our outlook as we communicated during the results of the first quarter. And baring unforeseen circumstances, we expect organic growth in both turnover and adjusted EBITDA in '26. That's short. I know, but let's -- that's all I can do for you at the moment. I think so far, the presentation part, we would like to open up for Q&A, please.

Michael?

Micheal Roeg at Banque Degroof Petercam. I have a couple of questions. The first one on balance sheet. Assets for sale was zero, even your presentation showed the other category with a couple of activities for disposal and the separation process may lead to a sale or an IPO or something else. So I was a bit puzzled by that. .

It's not that we are not working on this. We definitely are executing this. But according to IFRS, you have to pass certain hurdles in order to get to this point that it becomes part of the assets held for sale structures. And that's not yet meeting those requirements at this point in time.

If I'm not mistaken, it should be likely that you sell something within 12 months for IFRS to put that asset for sale. So that applies to other

That's not the only criteria. There are a couple of more. So it doesn't mean that we're not meeting the target in terms of timing, but there are some other criteria, which make the overall evaluation like that.

Okay, clear. And then about the margin targets for the 2 activities. With automation, you are actually already within that range that you desire, even though tire manufacturing is currently experiencing some softness -- cyclical softness. So when that recovers, you are already above your target range. Why did you not raise it like you did with electrification?

I think there are 2 points. Electrification is a clear moment in the sense that there is a different kind of trajectory on where, let's say, the next steps of electrification will go and communicatino about it. It doesn't mean that automation is in the kind of dual area or whatever you want to call it. It's just the fact that where we currently are, we still have some time left before, let's say, the targets are being aimed for. And in that period of time, of course, we will evaluate whether there is a necessary point to upgrade or, let's say, come in with a new target itself. It's not something we have foreseen right now.

Once the company -- Once electrification is separated, would it make sense for you to put separate targets on Vision systems and Tire manufacturing systems?

I think that's a very premature statement. Of course, once the separation take place. For sure, there will be communication about the road forward, the strategy, et cetera, of the Automation group. That can be moments where these kind of topics will be discussed, but that's still premature at this point in time.

Okay. And then my final question is on the electrification margin. It was 12.6%, and the goal is to reach more than 19%. During the presentation, you mentioned that utilization will be one of the big drivers. But I was also wondering, will further efficiency improvements be a big component of that improvement. Is there still a lot of benefits to get from that?

Yes, I can confirm that. There are still improvements, especially related to productivity. And we did some -- especially in that direction investments in the past few years, and we are taking in the returns on these investments. And that helps, of course, to get to a different, let's say, cost conversion in relation to the turnover and that helps, of course, the bottom line percentage.

So if you suppose that sales would remain flat in the next 12 months than with efficiency improvements, there is already further margin upside? .

Yes.

Martijn den Drijver for ABN AMRO. My first question is for Alexander. What prompted the CEO change? Can you elaborate a little bit on why you decided in conjunction, obviously, with the supervisory board to lead electrification. .

I believe that, let's say, looking also at my age that the future for TKH Group is in automation. And I believe that there's a very good point to hand over that activity to a new leadership, bring also fresh blood in that area. And so I can focus myself completely on the transition -- a smooth transition of the separation of the electrification activities, which is a very important project and which also requires full attention.

Just 1 follow-up. Does it have anything to do with the potential makeup of the acquirers of electrification, strategic versus private equity mainly. .

That is nice that you say that, but it's purely speculation.

We'll see. And then digitalization is doing well. Electrification is doing well. So we're -- I'm assuming a sale. Let's hypothetically assume that it will be a sale for both units. The use of proceeds within the Capital Markets Day presentation was allocated primarily to shareholder remuneration and a portion was allocated to continued M&A in automation. Now you have announced a new CEO. Will that allocation change? Or will it remain as is?

Maybe just to make a small correction. We have mentioned a certain category or priority of deploying proceeds when we look at the capital allocation. Organic growth is the first thing in automation. We also look for a build and buy strategy. And then we have, of course, elements like share buyback dividends and that whole basket presented slightly different, but I think that's important to highlight that. And I think at the moment, this is the strategy which we have. This is the strategy we have communicated. This is the strategy we move on. And I don't see much change in there.

Okay. Because normally, CapEx and dividend could easily be paid from your free cash flow anyway?

I still keep to the set of priorities as a list we work with. .

I'll move on. On the Eemshaven, how many kilometers did you actually manufacture in the first half and by extension, do you stand by that 600 kilometers for the full year and that EBITDA margin above 15% for offshore?

Now as Elling already mentioned, we cannot be too specific on the, let's say, developments of the activities, especially not looking at forward. And we are meeting all the customer requirements and these customer requirements are close to the figure that you just mentioned.

Maart Verbeek, the IDEA! I'd like to get back to electrification and also your new targets going forward. And if I'm correct, the base level for electrification is EUR 525 million of EUR 25 million revenues. If I add 9%, you will need to achieve at least EUR 680 million in '28. But if I simply double this year's revenue, you are already -- so are you very conservative or -- and you mentioned already onshore energy will do much better? Or are you very cautious about your offshore development going forward?

Just to make clear, the reference point, the 9% is starting as of the 30th of June '26. So the reference is EUR 604 million going forward. And we have not specifically mentioned 2028. We have mentioned midterm.

And what is midterm?

The next couple of years?

Okay. And then I'm a bit surprised about the current pipeline for the inter-array consisting of 92 projects and over 14,000 kilometers because a while ago, you mentioned it was only between brackets 11,500 kilometers and 72 projects more or less. And the statement is always that is until 2030 whilst I only see cancellations and postponements. So bit puzzled by a tremendous upgrade and outlook, whilst the market is showing actually the opposite. .

Yes, it is not anymore until 2030. I believe, [indiscernible] it is 2032 that we are looking. So that makes the reference base different. But yes, of course, it is a fantastic outlook that we have.

Okay. That's clear. And for the moment, you have upped the outlook for electrification for revenue and your profitability. But you have not done so for your ROCE, which was between 18% and 23%. What will your ROCE be within this new target -- set of targets?

Yes. That's a good question. I don't want to, let's say, shy away from answering this. But the ROCE target is a little bit dependent on the final transaction structure and the actual, call it, opening balance sheet, which electrification will start off with. And not having, let's say, that level of flexibility where this may go in a target right now, and this might be something we will address once the separation has been completed. .

But in September last year, you had a view about that.

Correct?

So what has changed in the meanwhile.

You can say the actual process gives a little bit more dynamics to this. And the fact that we basically take back the '28 target into a midterm target also gives a little bit of new flavor to the whole topic. And that's why we want to address it at the proper point in time. And that's once the transaction parameters have been clearly defined and then use that as a base point rather than constantly going back to assumptions, which are no longer applicable going forward.

Tijs Hollestelle, ING. Also a couple of questions. I do indeed appreciate the breakdown of the numbers are really helpful, especially indeed the revenue categories in the electrification business. So I had a question about the order book. It's EUR 507 million. And I personally assume that most of that relates to offshore cable projects because in specialty cables, it's kind of short notice orders, I guess.

Well, sure. No, there's not really, but it has a different dynamics. That's correct. But your assumption is right.

Yes. And then maybe in onshore cable a few larger orders, but basically the same dynamics. So you have a lot of visibility in offshore cable production in the order book. .

That's correct? .

That's correct. In the past, you -- I think you guided about EUR 170 million annual turnover in the subsea cable business. Yes, looking at first half, you're going to exceed that this year by a mile. And additional upside, let's say, into '27, if operationally, everything is running, what kind of annual sales levels are you calculating with for offshore?

What we are calculating with is something which we are not able to disclose forward-looking statements related to electrification in terms of what the second half or even '27 will be, we have restrictions as we are in the dual track process. So I sympathize with the question you have, but I'm not able to help you very much with it. But your assumption about order book is correct. And I think also about in itself, the production capacities, et cetera, that I can confirm, but not a specific outlook.

Okay. Yes, that's clear. And then in addition to what Martin was asking, at what stage of an offshore wind development does a cable manufacturer typically gets the order. .

That is about 2 years before the installation will be taking place.

The installation of the foundations.

Yes.

Two years before that you get the order and then when you start producing?

They are 2 years before. So the order can be even longer before that can go up to 3, 4 years. But we start and have the flexibility to start the manufacturing in most cases 2 years before the installation will be executed.

Okay. That is helpful. It's a bit strange from the client perspective. .

Yes. It is an important mission-critical part of the infrastructure. And so what we see in general that the customers, I like to see headroom in respect of meeting the obligations. And yes, that is nice because we can also then play with the utilization of the plant by moving capacity forward or the other direction to get to the higher utilization and efficiency in the plant.

Okay. Okay. That's very helpful. One final question for Harm. -- what is kind of your worst case scenario for the second half? Because indeed, the order book levels are quite low. I agree that you're managing the costs quite well. But what is kind of a worst-case scenario in terms of further downside in the top line in the second half?

Yes. Again, a very good question, but since it relates to forward-looking results. Yes, we have to state with what we already said on group level. So I cannot be very specific on this. Indeed, order book is going down since the order intake is at a lower pace than our turnover. We still have an order book, so we still have work to go. So we also still have time to receive orders and catch up again. But that's all we can say about that.

There are no strange elements in the top line of the first half. finalizing projects, a lot of revenue recognition. This kind of -- the underlying trend is visible in the first half numbers of the tire business.

No.

No furnish.

No. Just a very minute process, I think.

Yes, Martin, ABN AMRO again. On the Eemshaven, did Lochem provide any support in H1? And if yes, will it continue to provide the support in H2?

Well, it's very good that both factories support each other. So we have moved also capacity from Eemshaven to the onshore business. That is working out quite well and also some cables that fit better into the capabilities of Lochan, we are manufacturing in...

.

Okay. And there was already a question about the plus 90% EBITDA margin of electrification. And you mentioned that it was not solidly, but mainly due to optimization. But what have you baked in, in terms of capacity expansion because you were expanding in high voltage in Lochem, for example? So is that 19% on current scope or including planned expansions. .

That's including plant expansions, yes.

Okay. And how much would that be roughly be in terms of percentages? Is that 10% plus, 20% plus? .

Again, I'll come back to what Elling mentioned[indiscernible] .

And another question for Harm. Can you just talk a little bit more in general terms about developments in terms of Tier 1 versus the Asian players because I recognize from the tire manufacturers that they're having a difficult time. But I also know that partly that is due to the fact that the Asian players are gaining market share and building capacity in Europe in other regions. So can you please elaborate a little bit on how that mix is not reflected yet in your order intake? .

I think the current situation is that the reluctance to firmly place orders is not specifically Tier 1, that is in general over the whole industry. And that has -- and you could say there are -- there's a whole set of circumstances that create this reluctance in several areas, the reasons can be different. But in general, high energy costs, high input costs for materials, a lot of the tire elements are synthetic. So based on oil. So the high oil price, the high energy price does not help the customers. all the differences on trade barriers and tariffs, et cetera, makes it also uncertain.

And in that whole environment you see in general a reluctance. At the same time, there is need for additional capacity, and there is a need to change production technology into new technology to address the change in the demand for different kinds of tires in the world. So whether that is Tier 1, Tier 2, Tier 3, these elements are still there, all the same. So it's quite clear that there will be a moment that these projects will have to happen.

As Alexander already mentioned, we are not losing any orders to any competition. It's just that the market right now is holding its breath. We expect there will be a moment and nobody can really predict when that will be, but there will be a moment that these orders will come in. And the -- and whether that is from Tier 1, Tier 2, Tier 3. Well, actually, I think with the portfolio that TAH has to offer, yes, we're -- you could say it doesn't matter where or when or who is going to order what, but it's now just in general, a slow market.

Understood. And 1 final question, again for Harm. You were running VMI automated production. You had a vision on your wings. Now you have a new CEO coming in. What will be your role in the new management Board? Will that remain the same? Or is it going to change?

So far, it will remain the same. But as you say, we're excited to have a new team being formed. And of course, some roles have to be redefined. So we'll see. We're excited about that.

A follow-up question, Michael Roeg, Banque Degroof Petercam. A follow-up question on the question by Dash, about producing a cable starting 2 years before the client needs it for installation. You mentioned that you can produce so early that allows you good utilization throughout the entire year. I suppose that means that sometimes you have quite some cable on inventory along the next to the factory for which there's a lot of room. Is that on your books as part of inventory? Or does the client pay the final installment upon completion and whether it's next to your factory or somewhere else, it's no longer in your balance sheet. .

Exactly that last remark is the case. So we get paid once we do the factory acceptance test and then the cable is stored at the storage facilities that we have in...

Okay. That's reassuring. That's it from my side.

Trion from Berenberg. Just 1 question following up on what Tijs asked about the the Intera cable, that revenue run rate is higher than the revenue you talked about in the past. Why was that? Is that higher than expected volumes? Or is the pricing a bit higher or maybe a better mix? What was the reason?

What is also included is, of course, that it's not 100% cable sales. There is also accessories and services, which are part of the revenue stream, as we have seen also in '25. So from that point of view, it's not the only running rate in terms of if you want to convert it into kilometers or things like that, it's a combination of services, accessories plus the connectivity part.

Okay. So the EUR 170 million that we talked about was the pure cable part.

No, not truly, but that's more with the accessories. Currently, we have some other services part of it as well. .

Marteen Verbeek, IDEA!. Could you quantify that as a percentage of offshore energy what is services, et cetera?

We just help you with splits of the activities. Now you're asking already for the next one.

Yes. But obviously, it's a very important contributor to our profitability.

Yes. Bottom line, it does not have a big effect because outsourced activities don't bear the costs that you have when you manufacture the products or the services yourself?

Okay. Then 2 other ones. Firstly, you received framework contracts totaling EUR 1.4 billion within the onshore energy. For what time frame is this amount?

That's going up to 2032.

Even a little bit beyond. It's -- let's say, it has different end dates, of course. But the last part went to 34.

Okay. And then one for Harm. If you now look at your cost of sales, which came down by roughly EUR 1 million. We'll see revenue declined much more than that. It looks like H2, although you're not going to give some kind of comment outlook, will decline even further from what we have seen in the first half of this year. What will you be able to manage your cost to your new sales level?

Well, first of all, you cannot save yourself into prosperity as we always say, you cannot manage your cost down at the rate that your profitability remains the same if your revenue drops. But obviously, you can do a lot on your cost savings. That's quite clear. The only point is that we have to look at when our new order is coming in, when is the market going to return? And will we be able to then quickly scale up and pick up again? And benefit from a much higher turnover then. And it is this fine balance that we're constantly managing. So obviously, you can cut cost right away. But then you will miss out maybe quite quickly on the pickup in the market.

So that is a balance that we have to look for.

So you will be able to reduce the cost a bit, but not an awful lot.

Obviously, you can reduce your cost a lot. But that changes your organization into something that cannot be scale up again very clearly.

-- so it's highly likely that you will be able to reduce your cost. But looking forward, you will be underutilized.

Well, that is particularly a point that we will not comment on. We're doing our best, and I think so far, quite successful in managing our cost. But it's quite clear that if you are having new drops that even if you manage your cost quite in a very good way that the profitability drops a little.

Michael again. I have a question about the Vision Systems activity. I imagine one of the most important components is image sensors, but there's probably some memory chips in there as well and microcontrollers. And some of these types of chips are going up in price, some are going up exponentially in price. First of all, can you pass on everything to the client?

And second of all, was part of that solid organic growth in the first half of the year also price-driven next to volume driven.

Price-driven effect was limited. You always have price increases and introductions of new products and systems, which you have a different pricing and that can support also your margin depending on what the innovation level is and the use piece you have. What we see is that the scarcity of certain components has not really impacted us a little bit. And for the second half year, we see at this moment that we will be impacted limited -- the impact will be limited. And we can pass on fully the component price increases towards our customers.

This is Chase from Kempen. I recognize you can't say much about forward-looking outlook, but I will try to get a bit more detail on the first half regarding the electrification margin. And so obviously, a 12.6% EBITDA. Could you sort of break it down a little bit if there was a large margin step-up in the second quarter? Or do you think the first quarter and second quarter were broadly similar in terms of margin. That would be my first question.

I mean you started yourself with the kind of disclaimer to your question. I'm afraid I have to repeat that a little bit in terms of forward-looking statements. I think what we have mentioned that the operational improvements, which we have made in the last couple of quarters, that we believe that, that will not stop as of the 30th of June. So the benefits of that definitely are there, but I will share away from giving a specific percentage in terms of EBITDA improvement.

No, that's still helpful. And then I wanted to touch back on the onshore energy cables. So I know there's been some discussion over the last few quarters about the international expansion there. Could you provide a bit more of an update on that? When do you see that potentially becoming sort of the real growth driver? Or is that already, let's say, pushing the organic sales growth as well?

Yes, we see a good development. Our position also abroad internationally within Europe. Part of the success is already in the order book and also in the turnover. And for the medium term, there's very big opportunities.

Okay. And then final question, going back to vision. There's been a lot of discussion, obviously, from yourselves, but also from peers about sort of implementing AI tools and sort of enhancing functionality and value add declines there. And I'm curious on basically where do you see TKH Vision in terms of the other competitive landscape? Do you feel that you're exceeding expectations in terms of AI implementation if you see some peers perhaps growing that side of the business faster? Just any sort of commentary around the strategy incorporating AI division, please?

Yes. With respect to, of course, peers, what is going on with peers, we cannot comment. What we can see is that is AI is mission critical for the development and of the Vision Tech technologies. We already had longer time ago, a very strong software play, and that software play has been smoothly transformed in an AI play. We did quite some investments in AI competence center in Amsterdam. And at the same time, we saw that in several companies in the group, also further investments have been made into AI is different -- a difficult to compare with competition, but based on the market share that we see and the opportunities we see I believe we are doing a quite good job with our position in the AI with the AI tools.

You would argue that you're growing market share in the first half at least within Vision?

I believe it's difficult to exactly say that we gained market share because the comparison base is difficult. Some of our competitors are in different areas. Yes, in general, we see, especially in the defense sector that we are gaining market share, and I believe it's difficult to comment exactly the market share gains in other segments.

Do you have another question?

Yes. Good I had 3 small questions left. The first 1 is actually on digitalization. You've got -- you had about a swing of EUR 16 million at the EBITDA line, I think. Can you size a bit how much that came from sort of the pricing that you point to in the press release and how that compared to maybe also the volumes out of China and Poland. And of course, you had the benefit of closing the Dutch operation. So a bit of the -- what I was looking for is a bit split here, causing the EUR 16 million euro EBITDA swing? And then within that, how much of your fiber volume is now going into AI data center and defense-related demand, please?

Maybe I'll start at a moment, the second part of your question. What we referred to in our press release that basically the data centers, AI as well as defense they are taking up a lot of capacity in the existing market. It's not exactly the same as us deploying into these same 2 segments. We are very much focused when we talk about our fiber optic related business on the AI part and less on the defense.

But as these 2 segments are growing so quickly, it basically means that the whole industry, which has been building up capacity for the telecom industry is shifting gears towards complete new industries. That shift, we have well taken on that transition. So we have a good deployment of the fiber optic portfolio into the data centers that is driven by the North American market to a big extent.

And there, we have seen that as this massive, let's say, CapEx programs by very big clients in data centers will consume capacity over the next couple of years that fiber prices have seen a positive move up as capacity for certain fiber types is simply not there. I will shy away from specific margins and fiber prices, but an important part as the of the improvement you referred to coming out of price improvement, basically margin again.

All right. And then regarding provision, actually, a bit of a follow-up on Michael's question. Just I think you pointed to yes, wanted to the semiconductor, consumer electronics and batteries sort of leading your growth of 12%. Also APAC, very strong. So I guess these 3, let's say, markets, they're quite cyclical and correlated, right? So what are these 3 combined as a percentage of your Vision sales.

There, I would say, for 3D more important than for the 2D segment. And they are creeping up towards close not half, but getting close to half of the 3D sales. And as I said, less for 2D.

Okay. All right. And just a final question on bolt-on acquisitions. I think you talked about -- you talked about the prospect of that in automation for some time. Obviously, you've been very busy on the separation process. But is M&A sort of on hold, you'd say, until the separation is complete? Or would you still you sort of a vision bolt-on during this process? .

No, I think, let's say, this is part of the strategy. So if we are busy or not, we will keep on executing the strategy. So this is on the agenda. And this is what we are following through. So there is no stoppage due to the fact that we do other things. That's not the way how we execute the strategy.

Two more follow-ups. Martijn, ABN AMRO. Can you refresh our memory with regards to net working capital? -- as percentage of sales because it used to be that you had a target of 15% to 17% -- 12% to 15%, I apologize. Is that still applicable after the divestments? I don't recall from the CMD that you actually gave a post divestment target, maybe you have, but I just don't remember it anymore.

No, we have not given a specific one, but clearly, you see different, let's say, elements of working capital, having more impact on the 2 segments. So that's something which definitely will become more clear after the separation itself. Now it is a mixed basket. And as I said, I mean we have not taken back to 12% to 15% specifically currently, as Harm already explained, the impact of the order intake. That is a major issue when we look at the working capital level, which is 18% for the group.

Okay. And then my second question is with regards to Vision. You mentioned that 2D unit has merged its brands. that's possibly the first step. Can we expect more in the second half and into 2027 on the back end? So actual savings on the normal things when you integrate companies? Can you elaborate a little bit on that? .

Yes, that's actually -- that's ongoing. We mentioned in the Capital Markets Day in September that these steps are being taken. We have, of course, acquired in the last number of years, quite a group of companies. And of course, from alignment in terms of R&D road maps, et cetera, we've taken further steps towards integration of these agenda topics across some of the organizations. And that, of course, helps on one side, the OpEx level, but clearly, it also improves commercial opportunities for the group. And that's also where the benefit can be seen.

And would you say that you've already realized a part of it? Or is the majority still to come?

But as the majority of that, we have done steps, but we are not complete.

Tijs, still 1 follow-up on the offshore wind projects. You probably have seen that in the U.K. in January, there was an allocation round being awarded. I think most of the projects have been won by RWA, is RWA now actively tendering with TKH on the cables? Is that part of the 92 projects you're mentioning ?

What do you expect on out -- sorry, we cannot disclose, of course, specific negotiations.

But this RWA part of the 92 project? Because you mentioned 92 projects, I assume that our commercial people of TKH are talking to these companies. I believe I can say Yes. But 92 projects, I mean, if I basically do a rough rundown of the actual projects out there, I do not get to that amount. I mean are you also including Vietnam and Korea and Tiwan.

We are focusing on Europe. So these are all European projects. I believe at this point of time, there is no Asian project in Taiwan could be 1 or 2, but I believe I'm not sure there. But the majority is in Europe, including the U.K. .

Yes. And then the 92 projects also include projects which are years from...

Yes, of course.

More content right now.

Yes.

But then again, in theory, -- could you be in a tender with RWA at the moment? Or was that already the case, let's say, in 2025?

Yes, it is too specific about the customer. And we have a very high market share. We have a #1 position. So I believe that gives you already a good reference where we are active.

Okay. no questions anymore, then I'd like to thank you all for the good questions and also in the webcast, the analysts and a big thank you for attending this important half year update. For me, it will be the last time I will be presenting the results. So next year, you have to cope with my successor. I'd like to thank you all for, let's say, your commitment to TKH and especially also the audience and shareholders committed to TKH. And I hope, of course, to see you often again, perhaps in a different role, if it will be an IPO with electrification, I might see you back. If not, then, again, a big thank you for your thank you for your commitment to TKH and the relationship we had. Thank you again, and we close the meeting with this. Thank you.

Welcome to the TKH Q1 2026 Conference Call hosted by Alexander Van Der Lof, CEO; and Elling de Lange, CFO. [Operator Instructions] I would now like to give the word to Mr. Van Der Lof. Please go ahead.

Good morning, everyone, and a warm welcome to the conference call related to our Q1 results and trading update. Before we move into the details of the Q1, I'd like to remind you of the cautionary note regarding forward-looking statements and that you take good notice of what we have here on the screen.

Yes. The next slide shows our results development. It's a quite good result development, both in growth and turnover and the result, especially related to an improved performance of Electrification. So organic growth and turnover came out at 9.6%, and the adjusted EBITA came out at EUR 46.4 million, and that was an organic growth of 19.1%.

In this slide, I like to especially point out that we are progressing according to plan with the process of the separation of the Electrification. A lot of work has been done. It is a complex process, a carve-out process, but we are very confident that we are on track and that we can keep our promise that we will announce within 12-18 months, starting from the Capital Markets Day in September, that we can announce major steps.

I go to the next slide to give you a little bit more color on the results of the divisions. I start with Automation, with the 2 divisions, Vision Technologies and Automated Machinery. Vision Technologies, we had a quite good performance with 7.4% organic growth. What, especially, is good here that -- and that looks better than what we achieved in the turnover growth is the growth in the order book, especially in Machine Vision.

We have disclosed that we have seen a substantial increase in the order intake, which also translated in a substantial higher order book for Machine Vision. We have, by the way, also seen that several peers disclosed also very positive information.

So what we see is that the market is quite good. For us, it relates especially to consumer electronics, the semicon, where we see that we gain new positions for specific applications. And the defense sector is doing quite well with many new customers in our order book for the defense sector.

We also saw that Security Vision performed well, and there, of course, larger projects are an important, let's say, backup for growth, and we continue to have large projects in the Security Vision segment.

I move to Automated Machinery. As predicted in respect of and guided for, due to the lower order intake that we had in previous quarters, the turnover came down with 6%. And, yes, we foresee that the order intake will remain at a lower level. However, we see that we are continue to be well-positioned for a large sales funnel. For the short-term, we see that there is hesitation and some postponements. However, the pressure is on with our customers to move into further automation of their factories, and the high-end innovative technology is spot on to improve the efficiency of our customers. So we are confident that the order intake at a certain point of time will get to higher levels again.

I move to Electrification. We saw very strong growth, especially in the, I would say, the real Electrification, which is focused on the energy transition activities. Very high turnover, more than 20% organically. And, yes, we are very happy to confirm that a big part of the growth came from the increased output levels at Eemshaven. Whereas also the offshore activities are doing very, very well. We see a very high demand, and we are today almost sold out. However, additional capacity will come on stream in the coming quarters due to some investments we initiated last year. So we have the potential to further grow and support the demand from the Dutch network operators.

Specialty cable performed slightly better than last year. We see some favorable customer developments and especially in the Automation segment, and so we are quite confident also by with a positive development, further positive development of the specialty cable business.

We could announce yesterday, I believe, officially, that we won a new contract for the offshore wind activities, 162 kilometer inter-array cable for Vattenfall's Zeevonk offshore wind farm project.

Yes, then I move to Digitalization within Electrification, which is the segment that we officially report, the Electrification segment. We are very positive in respect of what we have seen in the development of the Digitalization activities. First of all, we substantially reduced our operating expense by also moving capacity from the Netherlands to Poland and making that space available for Electrification for the additional investments we are doing there. Very good to see a much lower operating expense and further a strong improved fiber optic market, especially related to the U.S., where we see a very high fiber prices because of shortages in that market. So a positive result for since a long time in the Digitalization area.

Yes. So far, the specific update per segment. Then I move to the outlook, where we have reiterated our outlook as communicated on March 5. And had barring unforeseen circumstances, we expect organic growth in both turnover and adjusted EBITA.

Yes. So far, our presentation, I would like now to hand over for questions.

[Operator Instructions] Our first question comes from Chase Kaufmann from Van Lanschot Kempen.

I just have a couple, and I'll take them one by one, please. Starting on the return on sales margin, could you discuss a bit of the moving parts between the fourth quarter of last year and this result? Because I'm trying to understand that step down. I understand there's probably some impact from the Eemshaven upgrades, but could you maybe help me understand the other moving parts in that?

Yes. Indeed, Chase part has to do with some of the elements you mentioned, like the Eemshaven. But also you have seen that in the fourth quarter, we had an exceptionally high level of deliveries across quite a few segments, including in the Automation part. And that helped basically the incremental quite a bit in the fourth quarter. That's not something we see across the board in the Q1, despite the fact that there are some segments, of course, which are highlights by Alexander, has shown a good growth in the like-for-like towards Q1 '25.

Okay. Yes. Also just a tough comp in that sense. And then the second question would be referenced in the press release, you're expecting to continue investments in Eemshaven throughout the year. Could you elaborate a bit on, what actually needs to still be done there and sort of the scale of these investments throughout the year? Should that also pressure margins for the remainder of 2026, or how should I think about that?

No, it's not specifically investment. It is improvement project. So some detailing and fine-tuning, also related to, let's say, the training of operators. And yes, it's a whole package, but with very limited investments, so the investment level of Eemshaven will be substantially be below depreciation level.

Okay. That's perfect. Last question from my end, just regarding the guidance. So obviously, it's an open-ended guide for growth, and I think everyone agrees you'll probably achieve that. But could you give us any indication as to sort of the degree of growth, the scale of growth? Is that 5%-10%? Above 10%? Any sort of, yes, color there would be extremely helpful.

I understand that that will be helpful, but as you know, we are in the dual track with regards to the separation of the electrification activities. That, in line with what we discussed already at the full year 2025 presentation in March. As a result, we are not able to disclose much detail with regards to the, let's say, outlook per segment, and therefore also not as a whole, beyond what we state currently in the outlook in the press release.

The following question comes from Martijn den Drijver from ABN AMRO ODDO BHF.

Yes. I have 3 questions, please, and I'll take them also one by one. On Smart Manufacturing, I'm still using the old terms. The organic growth decline was actually quite modest if you compare it to the order book decline of 2025, so minus 6% versus minus 23%. Is that decline of Q1? Is indicative of the decline we should assume for the whole of 2026? Can you perhaps elaborate on that element?

Again, I mean, this goes too much in the outlook. It's basically the question also Chase asked on the outlook per segment. But what of course is a fact that of course intake has been low for quite a few quarters, but It also means at the same time that the obligations which we have in our order book, they have to be fulfilled. And that leads also to, of course, execution of these projects and leads to commissioning of these projects at our customer premises. That leads to a certain revenue base. And that's basically also what we have seen at the end of last year, quite a few projects being executed and commissioned, and The same applies also for the Q1.

At least probably if I interpreted your own estimate for the expected reduction in Q1. So there, I think you have to look at the delta coming out of it, probably a higher level of executed projects commissioned than what you have in your own estimates.

Okay. That's fair. I'll move on to Smart Vision. You already elaborated a little bit on it, Alexander, that the plus 7% is healthy. But if we compare it to Koch Connect plus 21%, Basler plus 31%, okay, there was a bit of FX there. KEYENCE plus 18%, there was a bit of FX tailwind. Perhaps can you share your thoughts about market share? What happened with your market share? And related to that order book or growth or order intake, you mentioned the word substantial. Should we use the scale of mock for substantial, which would mean plus 35% to plus 45%?

Yes, we can confirm what you mentioned in, let's say, the bandwidth, so That looks very good. Perhaps the comparison base was for us a little bit more difficult with Q1 last year, which was a very good quarter where we had deliveries of some big projects, especially in defense. But yes, the good news is the substantial increase in order intake and the order in book, which gives a very good perspective for Q2 and the coming quarters.

So more in line with what we see from the benchmarks, and in that respect, we believe that we, in some segments even have created market share growth and definitely not have lost the market.

Okay. Okay. That's clear. Then moving to Smart Connectivity. I had a similar question to Chase. So when you mentioned further optimization steps are planned for 2026, and I understand your fine-tuning, detailing and training remark as well. But does that mean we can still assume that what you said with your full year results analyst meeting, that from Q2 to Q4, we can count on annualized sales of EUR 170 million to EUR 180 million in revenue, so that's 600 kilometers, and a 15%-17% EBITA? Does this remark about further optimization have an impact on what you guided at the time?

No, we always have had in mind that we will see a further gradual improvement of the output. And we have met already the 50-kilometer, but it is not yet a guarantee that we will continue on the pace of 50-kilometer in every month for also sometimes specific reasons and the length distribution you manufacture. But we are on, let's say, a very good path to move in the targets that we have set, and especially also the medium-term targets that we have set.

Okay. Then one final question, and I'll move back into the queue. That Vattenfall Zeevonk order, would it be fair to assume that you're going to manufacture that, produce that in 2027, and which also then suggests that you're almost sold out, if not completely sold out for 2027? Can you elaborate a little bit on that?

Yes, we are not yet completely sold out, but we are getting close. Zeevonk is today planned to be manufactured in '27.

The following question comes from Tijs Hollestelle from ING.

Yes. I had -- I need some help basically understanding the growth dynamics in the connectivity division. For that, I go back to the first half results '25, when you broke down the business in Electrification, 55% of divisional revenue, something like EUR 192 million. Then Digitalization 25%, something like EUR 88 million. And then the other business was 20%, so that's about EUR 70 million in the first half of 2025. And I think that somewhere in the second half of 2025, you decided to insert the other business or the lion's share of the other business into the Electrification segment, because the full year breakdown says 72% Electrification and 25%, leaving only 3% for overhead. That's about EUR 22 million, so that's less than the EUR 70 million in the first half.

To my understanding, that other business is what you now refer to as specialty cable. Is that a fair assumption?

No, the specialty cable has been from the beginning, be part of the Electrification scope. We have mentioned that also in our CMD sheets, where we highlighted which segments go into the scope of Electrification.

With regards to the segment of other which you refer to, obviously with the divestment of Dewetron and Alphatronics, the basket of other has been reduced substantially. And there is still a little bit left, of course, because you might recall that the Digitalization segment as well as some of the other are for divestment on the agenda. And what we have highlighted in this press release are the main elements, so Digitalization, of course, is a bigger bucket.

And the other segment has reduced substantially due to the divestments already made. There is still a little bit left, but not that material to have a separate listing or press release. If you look roughly towards the percentages which you highlighted, then within the overall Electrification segment, the part related to what we call Electrification as disclosed in the press release, makes up something between 2/3 to 70% of the total revenue.

Okay. So because -- I recall the revenue of Dewetron, but let's say in 2024, it was EUR 145 million, but you basically also divested some smaller entities which have disappeared now. So nothing moved from one category to the other.

Basically not. There are some small, very small amounts, but on the disclosure in H1, you will have a full overview of that. But in this, it's not to the material level that it requires disclosure at this press release to get an understanding of the moving parts within TKH.

Okay. That's quite helpful. And then I mean, the other question is also focused on it. If I, let's say, deduct from all the, let's say, the comments in prior press releases, then the big ramp-up step in the first quarter of 2026, it was still a relatively easy comparison basis. So basically, since the second quarter of 2025, the Electrification business already made big ramp-up steps. Of course, I understand that you try to grow it further quarter-on-quarter, but let's say the big steps have now been taken. So we don't -- we should not expect, let's say, EUR 35 million-EUR 40 million absolute revenue increases from the second quarter onwards this year. Is that a fair assumption?

I don't -- I mean, as you heard already, we are very shy in the current environment with the dual track that we make specific statements about, let's say, revenues and that kind of things in the periods to go. I think with the comments Alexander already made on what is the current level of manufacturing, the levels which we have hit, and still some of the elements which are up for further improvement, I think that gives you a little bit of a framework to work with.

Yes. Okay. And then a follow-up question on the offshore wind market. There, of course, there is in Europe, of course, a lot of shouting from European politicians that they want to increase the gigawatts installed, let's say, as of 2029-2030. But we are seeing some problems in the supply chain that there might be, let's say, production gaps in, let's say, late 2027-2028. How does that potentially impact, let's say, cable producers? I can imagine that for you guys, it's more easy to plan those kind of investments so the customers are also able to spread it out. Do you see anything of that?

No. At this moment, we don't see that projects are postponed. So we see a strong tendency that there can be shortages in the supply chain related to other components that you might see at this moment, and therefore you see a well spread, let's say, demand, especially related to the cable. And there could be a potential shortage in the cable if you would postpone everything to a later stage, so that is also well known at the customers. And what we also see is that in the shortage of specific components, that there are of course, opportunities to look at additional resources. And the last word has not yet been said about that. And we see that customers are looking to take care that, yes, they in the end can manage the projects in the timing schedule that they have set.

Yes. So basically, they're already polling you about, let's say, production slots in 2028-2029 proactively?

Yes. Yes.

The following question comes from Michael Roeg from Degroof Petercam.

I have 2 questions. I'll do them one by one as well. The first question is about the guidance you released at the full year '25 release, and you said that you expect organic growth in sales and profits with a soft start in Q1. So I was wondering, are these results today indeed soft according to your plans, or are they maybe even better than you had imagined?

I think, if you look at the overall performance, there have been some areas where, of course, we probably have done maybe slightly better than what was estimated. But I think if you look at the perspective, and was -- from Chase, the first question was, if you look at Q4, et cetera, there's still work for us to do. So weak between brackets, soft between brackets, but at the same time, I think we have a good start of the year with a pretty strong fundament.

If you look at the order book increase, especially in Vision, which was discussed also earlier, I think these are good steps which we have seen coming through. That gives, of course, confidence. But I leave a little bit in the middle of the theoretical debate on the definition of soft exactly. But there are some areas where we probably did slightly better than what was estimated.

Okay. Because If I look at the earnings trajectory of the first 3 quarters last year, and this year you start soft at EUR 46 million, then it implies that there may be an upward trajectory in the first 3 quarters this year instead of flattish. But that is probably, yes, you cannot comment because of the separation process, I guess?

It's your statement, not a question, I understand.

Okay. Well, then I go for my second question. The operating profit was EUR 6 million higher year-on-year. Based on all the comments in the press release, my perception is that Tire Building will have a lower result. Let's say the delta of 6 is minus 2 for tire building and plus 8 or 9 for everything else. Now within that everything else, the main recovery play is, of course, the subsea cable plant. But again, based on all the comments, it seems as if it's much more divided between all the activities. So I was wondering, is your subsea cable plant, is the improvement in output also leading to a strong growth in profits, or is that still to come in the next couple of quarters?

We had a really good improvement in Q1 in the offshore wind activities.

But judging by the delta and the profit...

Related to the profit...

There's much more potential. Yes, yes. It looks as if there's much more potential when I look at the year-on-year growth in operating profits. Is my reasoning, does it make sense?

Well, of course. I mean, I think what we have said already that there are different elements in this Q1. Of course, there's a lot of focus on subsea. We also highlighted that in subsea in the first quarter, we still had some upgrades which were executed. So from that point of view, if you transfer that into a statement going forward, of course, there's different availability at some point in time. So that helps, of course, then the overall picture. So when you talk about upside, for sure there is upside within the different elements within the group, including within Electrification, with both segments offshore and onshore.

Good. Okay. And then with respect to onshore, you mentioned, you're nearly sold out and new capacity will become available. Could you roughly indicate when that is available? Is that in the second half or maybe in 2 already?

Yes. It's -- it will already come in Q2. It's a whole package of smaller upgrades, productivity improvements and some additional capacity. And again, gradually during the coming quarters that will come on stream.

Okay. So not a big bump all at once at the start of that upgrade, but gradually over the next 2, 3 quarters. Giving extra lift to the sales in onshore. Good.

Yes.

[Operator Instructions] The following question comes from Maarten Verbeek from The IDEA!.

It's Maarten Verbeek of The IDEA!. Firstly, you just made public the Zeevonk order. In the past we have seen that you made this announcement public, but it was already in your order books because you were aware of that a bit earlier. In this case, is this Zeevonk order already in your order book?

No, it's not. No, it was not in the order book at the end of Q1.

Okay. You mentioned that the very strong order intake at the Vision lifted the order book by 30%-45%. I see no reason why the order book of Smart Connectivity should have come down. So that would be at the cost of Smart Manufacturing, i.e. Tire Building. And when looking at its revenue level, that more or less suggests that there has been virtually no order intake whatsoever for Smart Manufacturing in this quarter. And attached to that, do you still expect a recovery to take place this year? Because it seems that that might be, but then it will be very late this year.

We are not, let's say, making forecasts. If you remember the meeting we had in the 5th of March, I mentioned already that we have a very good sales funnel. The sales funnel has potentially even further increased. But we see postponements and we know for sure that there will be translation into orders, and that we will see a kind of peak again. But when the peak will come, we cannot forecast or give you guidance.

If I simply make the calculation, then your order book at manufacturing would have come down to some EUR 300 million. At a certain moment, you will have experienced major underutilization. When will that be the case?

Yes. For the coming quarter, we certainly see that we still have a quite high utilization. Not the same utilization as we had, of course, 1 year ago. And yes, in Q3 and Q4, the impact could come in respect of underutilization. However, we also have very short delivery times. And we have run an intense program. Besides of course, if you have lower intake, that you have normally also shorter lead times. But we also have changed some aspects in our lead times, and that helps, of course, that we can react quite fast. If there is demand, that we will be there and that it can almost have already on the short-term a positive impact on the utilization.

The next question comes from Martijn den Drijver from ABN ODDO BHF.

Yes. On Connectivity again, clarification again. Elling, at the analyst meeting when talking about incidental costs in 2025, so Lochem supporting Eemshaven logistics, the whole transformation or transport, if you will, from Digitalization from the Netherlands to Poland. You gave guidance that those incidental costs were roughly between EUR 10 million-EUR 15 million. Have those costs fallen away completely in Q1, or was there still an impact from those incidental items, i.e. coming back to Michael's question, there will be -- is it logical to assume a step up in or a step down in OpEx again, going further into Q2, Q3?

That's correct, Martijn. Of course, I mentioned in the March meeting that this EUR 10 million-EUR 15 million had 2 components. One was the subsea activities and the other one the Digitalization part, the transfer of production from fiber optic cable to Poland. The latter part has basically been completed, and there are no more one-off related costs on that end. There is still a little bit left within the first quarter in relation to the subsea activities, but not to the level as I guided for '25. So that has been reduced, but there still is a little bit.

[Operator Instructions] The next question comes from Tijs Hollestelle from ING.

Yes, I was a bit confused because if I look in the annual report, the Dewetron business is commented in the manufacturing division. But apparently, the revenues were booked in the Connectivity division.

I couldn't hear you, Tijs.

You mentioned that the disposal of the Dewetron had an impact on the change in revenue, but the Dewetron is mentioned in the annual reports as part of the manufacturing business.

That's correct. Yes.

So I don't -- maybe I didn't ask the question in the right way, but how can we do this? In the first half of 2025, the cable business was EUR 192 million based on your divisional breakdown. On the full year breakdown, the second half revenues from that Electrification jumps to EUR 332 million. So part of it, of course, is the ramp. I get that. To me it seems that a big part of what you previously reported as other has been put in that category. And my question is, what is that business? And then a follow-up on that, what is, let's say, the margin profile of that business? Because that is not the growth you have seen in the ramp, let's say, starting somewhere in the second quarter of last year. It's a huge jump. It's like EUR 190 million.

Yes. I think, Tijs, what that probably was in your prior question. You asked if the specialty cable was included in that. That had been included from the beginning. I think that's probably the one you're missing here.

Yes, but it's an absolute step up. There's nothing else in that?

Yes. No.

It appears we have no more incoming questions. With that, I will now turn the call back over to Mr. Van Der Lof for any closing remarks.

Yes. Many thanks for your attendance in the conference call and for the questions asked. I hope we could give you a little bit more color on where we are and what the perspective is. Although we had to be limited in respect of what we can give as specific outlook for the whole year. Again, thank you for your participation, and we hope to be in contact with you in the coming quarters.

Good morning, everyone, here in the Okura Hotel and also everyone in the webcast participating. Today, we are presenting our annual results 2025. And before I go into that, I'd like to point out to the cautionary note regarding the forward-looking statements. And then I immediately jump into the key messages for H2 or for the whole year, of course, and starting with the fact that H2 was substantially better than H1. That is also what we guided for. And it was, of course, also back-end loaded with the pressure and the drive to have -- to deliver a very good result in Q4. And actually, we are proud that we delivered such a strong result of around EUR 70 million EBITA. It is not working here that the slides move forward.

So when I look then into Automation, Automation had a strong performance, especially in the Smart Vision. Smart Vision had a substantial growth in the profitability, driven by a very strong development of new end markets that we delivered. And what we also saw is that the innovation level was really high, above 30%, so above average on, let's say, the Smart Vision activities. What we see is that especially also the demand in smart software did very well, and we are focusing further on solution performance. And with strong positions there, we see that the added value has further improvement potential although the added value is already at a very high level in the Vision Technology activity.

Within automated machinery, of course, there was an impact of the lower order intake during 2024 already, leading to a lower turnover. But there, we had an extremely well performance in Q4, and that had especially to do with larger projects nearing completion and the operational excellence that we were able to implement and that led in the end to a higher margin on these projects and that we originally estimated. We were somewhat conservative in respect of the outlook for automated machinery. And what is also very good news that we made further inroads with the UNIXX technology, first delivery of working system and additional orders that we received and especially a new area where we are penetrating now is the motorcycle business with also 2 UNIXX systems sold in that area.

Within Electrification, of course, we saw the impact on the results with the output issues that we had in the Eemshaven. We saw gradual improvements during the year and actually a quite good performance already, not what we targeted for, but a substantial improvement in Q4. And you have to take into account that, let's say, until the third quarter, the profitability was really low or almost 0. And so if you look then at the whole year, the main contribution came from Q4. And what is also very good that we won a lot of additional new contracts. Our technology leadership is really proven with a very high market share above 80% and still also a very good outlook for the market with until 2030, more than 14,000 kilometers in the pipeline for which we are tendering.

And last but not least, we announced also today that we had a very big contract win with Alliander, DSO in the Netherlands, where we announced that we have an 8-year contract with a total volume of around EUR 650 million. So performance is developing in the right direction with the offshore and as well the onshore is having also a very good perspective for the coming years. Of course, you all remember the Capital Market Day in September. We are excited about that to unlock our value of the TKH Group. Of course, we also have our Capitalize and Execute program to increase the return on our existing building blocks, and there's huge potential and focus there is really key to get the return that we can achieve. We announced there, of course, that the future of TKH is in Automation and that we are looking for the separation of Electrification and the new shareholder structure for those activities.

Later in the slides, we will come back to that, that we have chosen a dual track. We have selected an investment banker for that, and we are working very hard and making progress already in the past quarter, and we will also be able to announce, I believe, in the coming quarters, further actions to give confidence that it is a good move and the perspective of this separation is huge.

I go in a little bit more detail to the results. I try to move quickly through that. I already commented to several remarks on this slide. I'd like to point out to the return on sales, a good level, 14.6%, although similar to 2024. Yet the performance of the Electrification business is not there to be able to achieve an even higher level. Turnover in the Electrification business in Q4 was up 29%. Automated Machinery down 6.9% and Vision Technologies up 1.8%. And we have to look at Vision Technologies that the comparison base was quite challenging because of the delivery of some very large projects in Q4 last year.

Here, we have the overview of the performance of the whole year 2025. I'm not going to in detail, you can read it for yourself, and I will comment further to the divisions in the next few slides, whereas it is again important to mention here the high innovation rate, 17%. I believe that is really driving the technology leadership that we have and the continued aspiration that we have also there to be a leading technology company in the areas that we are active in. And of course, the leadership leads to above-average margins. And that is, again, in relation also to the perspective we see in return on capital employed, which is not at the level that we targeted at the Capital Market Day, but there's still a lot of room to improve there. I believe it is also good news that the net debt came down. We managed, I believe, in a quite well way the working capital. Elling will come back to that later.

I'd like to mention here the EcoVadis result. We are with the Gold awards in the top 5 of companies evaluated by EcoVadis. And as we are a very customer-centric company, this helps us tremendously in positioning ourselves in respect of the sustainability priorities we see at the customer base and that customer base applies to all the divisions that we have in the group where we see that appreciation for the sustainability position of TKH. I move then to the specific results of the 3 segments. Here you will notice we are still reporting in the 3 segments. We already had a pre-discussion before this meeting that, of course, the desire to get more input on how the automated, the Automation activities and the Electrification will look like starting from Q1 and moving up through the rest of this year and the future. Of course, we will guide there and -- but it was too early to do that in 2025. So we still reported in these 3 segments.

I mentioned already the substantial improvement of the Vision Technology activities related to the EBITA. Here we see that the order book slightly came down. There is a currency effect in that. Elling will come back to that later. But we also have to take in mind that we had some really large projects that in the end, normalized during the year into, let's say, smaller but still sizable projects. And yes, with the fantastic short lead times that we have in a very well-organized supply chain, yes, our customers can wait till the last minute to order and they don't have to book already, let's say, capacity a long time ahead. And that's a big change that we saw compared to 2001(sic) [ 2021 ], 2022, where most of our customers try to secure their business for a much longer time than that we see today.

A very good improvement of the return on capital employed. 2D Machine Vision, strong end markets, where especially our technology differentiation worked out quite well to gain market share and to have our market share. We see in 3D Machine Vision, the focus on the solution business is really helping us to improve the added value. And as you can see on this slide, the added value increased from 60.6% to 62%. And yes, we are quite selective in where we want to be active. We don't want to commoditize our business, and there's a lot of potential in adding value towards our customers and that we get the appreciation and the return we can get on the turnover, especially well within 3D vision battery business and factory automation, including the wood processing business.

Within Security Vision, the growth was modest, again, also related to the comparison base of 2024, especially the demand for mission-critical systems was very good. We see that with the geopolitical situation, the priority for mission-critical solutions is really high. We are well positioned there, and that has a fantastic growth perspective. And also doing quite well. We had a huge -- a very big parking guidance project in the U.S., a very profitable project, and that was, let's say, kind of breakthrough again in this field of parking. And I believe a good move related to the whole Vision Technology we can supply in this parking area, including the mission-critical systems that we develop. I move to the next slide, the Automated Machinery performance.

We can see here the decrease in the turnover of 14.2%. Added value also at a higher level. We see that also in the mix of activities, we had a quite good performance. The innovations play an important part at our Tire Building activities. Of course, also the divestments helped where we had a lower added value. But this is the direction we need to move and it is a good confirmation again of our USPs and technology leadership in this segment. A record high return on sales over the whole year. Last year was already a very high return on sales was 19.1% and last year -- in '24 and last year was 19.4%, we even overachieved while actually, we were somewhat underutilized related to the lower turnover.

The order book came down, and that impacted the result. The order book -- the order intake was already lower starting by the end of 2024. But yes, as I mentioned, the mix of activities is also very important. The outlook in principle is very, very positive for this activity. The drivers that are there with Automated Machinery, hands off, eyes off manufacturing is really key. We see that many of our customers have really difficulty to find the skilled labor. And we keep on developing to eliminate as much as possible operators in, let's say, the manufacturing with our systems. And again, had a positive impact in Q4 related to the excellent operational performance on projects, larger projects nearing completion. I go to the next slide, the Electrification.

I believe I already mentioned most of the points in the first slide. What I can add here is, again, the outlook is really positive with the unique technology that we have, the dry design technology which offers really big advantages for the contractors, reduces risk during the installation and again, lowers substantially the cost of the whole installation, including the transportation cost because we are located at the most ideal location in Eemshaven to serve the contractors that have their equipment close to the Eemshaven. Of course, we saw the impact of the outsourced activities.

We have a sizable project of more than EUR 200 million, the ICO project and the outsourced services have a very low margin. There's a big leverage has there been to winning this project and yes, to secure the business, but the margins are relatively low, and we see that back in the added value that was 4 percent point lower because of this mix in activities. And then digitalization, still a very difficult end market. We are not profitable there. We are on the move to get it profitable, but it will certainly take a few more quarters to get there. The cost base is much lower there now. So that is supporting, of course, to return to profitability, but the end market is still difficult. Of course, we see signs in some geographical areas where the demand is higher than the supply. And that always helps, of course, in a global demand also to balance the supply and demand and get to a better pricing potential.

Yes, my last slide here today is about the dual-track process that we have initiated. We have not a preferred option at this moment. We keep all options in that respect open related to the dual-track process. I believe we have clearly pointed out, and it is confirmed again in this sheet why we have made this choice for the separation. I believe that, that has been understood quite well. And yes, we are excited to work on this process. We have 2 very strong activities that deserve also the right, let's say, ownership structure to support the future growth opportunities.

Thank you very much for your attention, and I see you back with the Q&A.

Thank you, Alexander. Good morning to everybody. As usual, I'll walk with you through the financials, starting off with the top line, geographical distribution of our revenues. As you can see here, a little bit of change, not too much. Europe remains at the center of our activities, 60% just like in '24, but a little bit of a shift from the Netherlands to other parts in Europe. Asia, pretty strong, 23.7% of the total. That's mostly driven by the fact that the Security and Vision propositions in Asia have grown compared to '24, mostly in that particular region. North America, more or less stable, just below 15% of the total. And then the other regions, there you see actually a reduction towards 2.7% of total revenue, and that's mostly coming out of a little bit of a different distribution within the Tire Building revenue, where things went a little bit back to the more traditional regions, I would say, which we disclosed here.

If I walk with you through the profit and loss account, what I usually do, then, of course, first of all, looking at the revenue again. Organic growth, 4.9%. As you can see, acquisitions and divestments had an almost EUR 27 million impact. About EUR 6 million, EUR 7 million came out of the acquisition of Liberty Robotics and the other part has to do with the divestments of which Dewetron is an important part.

Looking at the added value, Alexander highlighted this already a little bit, how did the added values develop per segment. Clearly, Vision is doing well. Automated Machinery, a very strong increase in the added value, also partly driven by all the efficiency improvements and operational excellence programs, which have been already implemented since quite some time and getting its full effect, but also the operational performance of the projects, which are near to completion.

And Electrification, the split, the mix between, let's say, own produced and sourced products, which are in the top line was different than in '24 with more outsourced services as part of the revenue stream having impact on its added value. Making good contribution in the end, but added value-wise, lower than when we produce ourselves. And that leads to adjusted EBITA for the group of close to EUR 190 million. That's about 7% -- 7.2% organic decline compared to '24. And you can see that the effects of the acquisitions as well as the currency fluctuations were rather small.

If we then go down in the P&L, the one-off expenses. Most of it took place, EUR 16.8 million is the total for the full year, EUR 16.3 million already was established in the first half of the year. The biggest ticket, more than EUR 11.5 million is related to additional transportation costs, which we had in subsea as a result of the delayed effects in production for which we then were liable for the transportation cost towards the final customer. The acquisition and divestments had a ticket of about EUR 3.8 million and restructuring and digitalization, about EUR 2.3 million.

Then on the impairments, I think it's important there, the effects of the transfer of our fiber optic activities from the Netherlands into the new factory in Poland that has been completed, as mentioned earlier. And that resulted to some remaining assets to be depreciated as they don't find a place in the new location. And that goes within the chain. That's within China, the Netherlands, where this took place. And then, of course, as you always see with the high level of innovation, which we carry and the amount and the expense we have related to R&D, there also is some cleanup always in portfolio because not all the portfolio is getting to its full benefit, about EUR 2 million on R&D projects from the past, we had to impair.

The results of associates, mostly the entire amount, which is mentioned here, the EUR 34 million is coming from the Dewetron exit, a very well-performed exit with a very important benefit. Then on the financial result, we have seen a little bit of improvement there, mostly driven by the exchange rates. If you look at the delta there, we have about EUR 4 million, EUR 4.5 million effect, and that basically explains the delta between '24 and '25 on this particular line. Tax rate, the normalized effective tax rate, just over 22%, 24% in prior year. And I think if you look at also your models, probably in the range of 23%, 24% is an element where you can work with.

Taking -- next look at the balance sheet. Important, I think, is the working capital. You can see in our press release the details of the components in the balance sheet, of course, we have always been discussing the inventory levels. Inventories came down pretty well, EUR 340 million, still a sizable amount, but it was about EUR 400 million. So the reduction is EUR 60 million. But what we see on the other side in the construction -- contract assets, there, we have a substantial uptake. A lot of projects that was earlier mentioned are in the final stages of completion. And of course, they are still in our books. The liability -- the contract liabilities are lower due to the fact that order intake is at a lower base. So the delta is substantial.

We have a net contract assets in '25 finishing at about EUR 60 million compared to a negative, so a contract liability of EUR 11 million in '24. So the delta is pretty big, and that goes back in your working capital. So from that point of view, the underlying effects, supply chain improvement, stock levels, et cetera, are doing very well. But on the effects of completion of projects within the Tire Building activities and the lower order intake, you see that basically that effect evaporating, bringing the overall working capital more or less in line in close to the EUR 300 million as we had in prior year. And the 17% is too high. We keep on referring to roughly the 15% is where we at least want to be. And I think that's also feasible if you look at the steps which we have taken on the various elements, but the timing of especially the intake effects see that the level goes towards the 17%.

That, of course, has also impact on the net debt levels. We improved from close to EUR 500 million to EUR 460 million, a leverage rate of 1.9. At the half year, we were still at 2.6, so a good improvement there. And if you look at the bigger tickets here, then I think it's important to highlight the CapEx, which we have in both the tangibles and intangibles. You see them here accumulated towards about EUR 130 million. As mentioned earlier, and there's been a lot of questions, we had the special strategic investment project or program for quite some time. That had still a little bit of impact in the first quarter. About EUR 15 million, EUR 16 million of this cash-related element in CapEx is related to that program. So normalized for that, we are in the range of EUR 115 million. That's also a kind of level for your models for going forward.

Looking at free cash flow, the ones who follow us for a while know that normally second half is, of course, better in terms of cash flow generation. We can also see that in '25. You can see the various deltas here, but I think especially the free cash flow in the second half of close to EUR 100 million compared to a negative of EUR 23 million in the first half came out at a total for EUR 75 million for full year. Also there, not really where we want to be, but I think it's a good step up in the second half at least. And if you follow the capital expenditure line on the PPEs, then you will see that the impact of the strategic investment program is really diminishing, and we're getting, especially in the second half already to the normalized level that I talked about earlier.

Then my last sheet is related to the outlook. Our strong building blocks with leading technologies and strong market positions form a strong foundation for '26. Barring unforeseen circumstances, we expect on balance organic growth in turnover and adjusted EBITA in '26 but with the first quarter being weak. I want to mention maybe before we get immediately the questions on this one, we are a little bit, let's say, less disclosing details on some of the outlook components. In the past, we had a little bit more detail on this.

Alexander already mentioned we are in a dual-track phase. So there will be a lot of, let's say, disclosures coming up, a lot of, let's say, liabilities in relation to disclosures coming on the agenda and also in different shapes and forms. So from that point of view, we are a little bit more, let's say, reluctant to go in too much depth at this point in time. That's the statement I would like to add to this point here.

Let's open up for Q&A.

Martijn den Drijver, ABN AMRO ODDO. I'd like to start off with connectivity. And I'm going to ignore the Q1 for subsea. But on a pro rata basis, Q2 to Q4, would that 600 kilometer, EUR 180 million in sales, 15% to 17% EBITA margin still apply? Or is that upgrading of the equipment and the scaling up still an issue beyond Q1? That's question one.

I believe that is really a key target we have, and we are, let's say, positioned to achieve that.

Okay. The second one...

With a much lower risk than last year. So we have seen in the press release that we had excuses related to type test, larger dimensions and especially the larger dimensions opened up new issues, but we also announced that we did a major upgrade of one of the key lines related to the final process in -- for this cable. So the risk is much lower compared to last year and even compared to Q4, which makes the possibility, which is the 600-kilometer way higher than in 2025.

Well that begs a follow-up. What is low risk in your book?

Low risk. that's difficult to exactly pronounce that, yes, the -- let's say, the opportunities are bigger than, let's say, the negative aspect.

Okay. I'll move on. Would you be able to help us out, you mentioned the transportation costs, but there were also double costs for Lochem in supporting subsea. There were also double costs for Haaksbergen in their transition to Poland. So if you add it all up, what are we talking about of rather incidental OpEx elements that are not likely to reoccur in 2026? Just are we talking about EUR 15 million? Are we talking about EUR 20 million? Just a bit more color so we can we know what to expect at the OpEx level.

I think if you look at the elements you mentioned, I think an important part is indeed also the transfer of the telecom activities to Poland. And that's probably roughly half of the, call it, incidental related cost. And that will be in the range of EUR 7 million to EUR 8 million. So you're more accumulating that than towards in the range to between EUR 10 million and EUR 15 million, more on the higher end of that bandwidth as being the, call it -- I don't want to get into a definition question of one-off, but more in response to your question being a kind of incidental related item.

Around the EUR 15 million level. Got it. And then a final question on connectivity and then I'll move on. Onshore obviously did well. Is that unit on track with regards to the EBITA margins that you've set? Is that also in that 15% to 17% region already? Just to get a bit of sense of where that unit stands.

I believe you underestimate the underutilization effect there. So the cost level has been relatively high there with the transformation, Elling already mentioned that from Lochem to Eemshaven, whereas we could not, let's say, reduce the cost of, let's say, all the employees as we were preparing for the growth in onshore, both in medium and low voltage as well as high voltage. So we see a higher cost level that had still a quite big impact also in Q4. And with the higher utilization, it will, in the end, move into let's say, substantial higher return on sales than that we achieved in the past year. And we'll come back to the level that we saw in, I believe, 2023 when we had a high utilization level and the cost conversion was much better in place than it has been in 2025.

Got it. And then a question for Harm. Can you talk a little bit about the customer behavior in Q4 going into Q1 2026? What are you seeing in terms of your Tier 1 clients and your Tier 2, Tier 3 clients, China and Asia versus European? What are you seeing? What are they telling you?

I think the picture is different for each and every group of customers that you now refer to. If you look at the traditional large players, the Tier 1s, there you see that the effect of a pressure on the automotive industry in Europe is still having an effect on their total operations and their profitabilities on that. So that means that the -- when you really look at modernization plans, expansion plans that is still in Q4 was that still limited. We expect that at a certain point in time to flip and get back, but that will not be early in '26.

If you look at the Tier 2, Tier 3, there, you see that the -- that there's still a lot of opportunities seen in -- for them to export to the larger markets in Europe and America. And in order to position themselves well. We're talking about a lot of overseas projects in North Africa, in Southeast Asia, in Eastern Europe, but it takes time to convert plans to actual delivery of equipment. And that is happening in a world that is still a little bit clouded when it comes to the short-term economic perspective coming from, yes, import duty effects, import barriers, et cetera. So there is still some reluctance visible. We are positive when it comes to the '26 total order intake. We're -- yes, we're convinced that, that will improve compared to '25. But there's still, indeed, in Q4, there was still a reluctancy to really move on quicker than what was happening in the first part of '25.

Okay. Got it. And then a question for Alexander and Elling. If I look at your balance sheet, the 1.9 covenant net debt to EBITDA, your free cash flow conversion, you're guiding for lower CapEx, probably the same net working capital or even better. So you're going to have pretty good free cash flow. Why did you decide not to go for a share buyback given the proceeds of Dewetron? Give the shareholders something at this point in time. What was the thinking behind that decision?

We have -- in our Capital Markets Day mentioned that one of the elements is share buybacks. The disclaimer is the 2% level of leverage. That's basically where we are at. There is quite a few points which you highlighted, which are to come. But at the same time, of course, we are running also this dual-track program. And there are a lot of things coming together in '26. So from that point of view, it's not that we will start with every kind of KPI, which gets into a parameter and pull the trigger. We have a clear plan on how we want to execute the overall transition towards a split. And we don't want to get the process hijacked by all kinds of intermediate kind of steps. But in terms of allocation policy, you're right, it's part of our, let's say, elements which we address, but at the right times in the right context.

And then just a short follow-up and then I'll hand over. Where are you now in that dual-track process? Are you still in the selecting of the long list? Are you -- are parties already providing indicative bids, nonbinding? Where do you stand roughly?

You are a little bit on a fast track. The performance is really key that we achieve in the improvement of the result. So we don't want to give it away for nothing. The potential is huge. I believe it is important to show a track record in the performance, and that should be close to the guidance we gave at the Capital Market Day at the bandwidth of 12% to 15%. I'm not saying that we will achieve that this year, but we should make a big step towards that target level and prove it in the results in actual figures.

And there, we need Q1, Q2. We can prepare everything. We are preparing everything. We are looking at the organization structure, doing investments in the organization structure, preparing for the separation. The legal separation is in place. And so we have set several milestones during the year. And let's say, discussions with potential interested parties will not occur before, let's say, mid-second quarter. You need to prepare well. I believe that is really key. And don't be on a track that you are too much hurried and then you get a kind of -- you have to step back in what you want to achieve.

And I can add something to that because that probably will the next question, what is the timing we are targeting. We are preparing for Q4 to do a transaction. And of course, when we look back at the Capital Market Day, we announced that we would announce material steps within 12 to 18 months. And we are very well in that time frame that we announced there. I believe we -- you want to ask something?

Yes, because if you say -- it's true, you said 12 to 18 months.

Yes.

But I also remember that in the Q&A, you said when asked, we'd like to move much faster, we'd like to be faster because it provides clarity both to our employees and to our customers. So how do we balance the two?

The balance is working really well. And it is a clear, let's say, communication that we have. And everyone knows that this is the past and that the patients need to be there. And again, it's also about finding, let's say, the right environment related to all the stakeholders and, of course, also the right valuation that we are not going to discount hundreds of millions because of a fast track.

Tijs Hollestelle, ING. Interesting conversation. I want to also drill down a little bit more on the Connectivity division. So you provide, let's say, insight on the split there. So the telecom business made EUR 182 million. If I listen to Elling with the accidental OpEx, I would say that, let's say, an operational EBITA loss of somewhere in the range between EUR 5 million and EUR 10 million is the right assumption?

That's correct.

Then you have, let's say, EUR 525 million in the cable business combined. That leaves about EUR 22 million of other business. It's not really material, but was that profitable?

No.

Loss-making?

Yes.

A couple of million.

Couple is...

Below EUR 5 million.

Definitely below EUR 5 million.

Okay. Just to get, let's say, the starting point which you had the discussion before the meeting. And then the -- what was the actual, let's say, offshore revenue in 2025?

About EUR 135 million to EUR 140 million.

That is for me a bit of a positive surprise. And then -- but you still stick to the EUR 180 million revenue target for this year, there's also potentially upside to that number.

Just you transferred to Martijn's statement towards the target for this year.

I tried.

That's smart, but condition was that Martijn's assumption was that if you look further down the road, starting, let's say, Q2, if you then analyze the remaining period, should you be back at the EUR 170 million, EUR 180 million with a 17% return on sales. And that has been confirmed. So from that point of view, that is there. But it's not the same as '26.

Yes, I get it, yes. But let's say, the run rate somewhere in the third quarter that people can see there's potentially also upside. That is indeed what I'm asking. And I'm also still a bit puzzled, why don't you give us, let's say, a direct answer on the profitability of the onshore cable business because the recovery is now taking place for 3, 4 quarters in a row. Has always been quite a stable business, core business for TKH Group. I would say that the EBITA margin is like 10% or so on that business. Is that still not the case because of all the switches and double costs with subsea changes?

Yes. I think Alexander mentioned already the underutilization due to the suboptimal, let's say, utilization of the asset base, which we had. Market looks good, but we have a lot of internal, let's say, moving parts and some costs which are not yet fully paid for through the utilization itself. So that's what we are still having in '25. And that's, of course, going to change going forward. We see order intake further improving. The market attractiveness becomes bigger and bigger. So that utilization effect comes down. And the other elements within call it, the connectivity or cabling part are finding their own ways in the sense that the telecom part that has been organized has been separated from the operations in the Netherlands and from a cable manufacturing point of view, is separated and has its own activities, et cetera, from that point of view, I would say in '26, you will see an improvement in that particular area.

Yes. Okay. That's helpful. And...

And just to finish that part, the full disclosures, and that's why you say why we don't disclose it in the dual-track, there will be sufficient disclosure. And I don't want to be ahead of that process. So from that point of view, you will see the disclosures, but you have to be a little bit patient.

Yes. I get that. And indeed, your statement on Q1 for this year and the outlook is also mainly related to the Connectivity business, which is still a bit unstable, shaky.

Shaky is a word, which...

We will show a substantial improvement in Q1 compared to last year in Connectivity. However, we have, of course, the lower order intake effect within Tire Building. So the reality is that the profitability there will be lower compared to last year Q1. So that is the balancing act where we are in. And again, with a good progress in the Electrification business with the result in Q1.

Year-over-year. Okay. Yes, that's helpful. Then some lot more detailed questions. I also noticed, let's say, relatively low one-off costs in the second half that is good. And with your -- let's say, your current projects in the cable business, is there, let's say, any nervousness on the contract dates? Or you have sufficient time to produce on time in 2026?

I will not say sufficient because what is sufficient...

Deadlines.

You would like to have, let's say, half a year, 12 months headroom. But we are close and we are in control of meeting deadlines. And that has also had its impact also in 2025. We were really customer focused to make it happen to deliver what has been promised at the right time in the right quality and the right length. And that also impacted somehow our efficiency related to our production. And that will also further normalize during the year as we are creating more headroom in the delivery times and then have more flexibility to also combine certain cable types, so which you also get huge additional efficiency instead of continuously changing over from one type to another type, you have your start-up costs. And so that has also real big improvement potential for '26.

But because of the unexpected delays we had, that's why I'm asking it. I understand that you're answering the question based on...

I already answered that the risk is much lower that we will not have our output performance compared to last year. With all the improvements, all the upgrades we did, we still can acknowledge that we have the right technology. We have the best people in-house, but it has been extreme what we had to realize, and that is really has been substantially normalized in the past few quarters, and that gives confidence that we can meet the requirements, and we are creating more headroom during the year because we like to have that headroom. And our customers also, they prefer to have it 3 months earlier or 6 months earlier than that they need the cable because the cable is essential for, let's say, the finalization of these multibillion projects.

Yes. Okay. That is clear. And then moving to another division. Did you somehow spotted any change in the volumes in the Machine Vision business coming out of Germany? Do you see any, let's say, cyclical recovery signals in the German-related business in the cameras?

Nothing material, I would say. If you look at Vision as a whole, it has shown nice growth. Europe is a little bit on the weaker side in that growth aspect, and Germany is then at the bottom end of that.

Yes. It has been very weak. But yes, no change in...

Nothing material.

And the FX impact you were mentioning?

Yes. I mean that was indeed on the order book because if you look at our -- and I mentioned that also in the geographical split of where the revenue takes place of Vision. APAC is important and North America. And I think if you look at the order book itself, it's about EUR 130 million for Vision. Prior year was about EUR 140 million. You will get close, not exactly, but you go close to the level of the '24 order book if you normalize it for FX effects. You probably get EUR 138 million or something like that with EUR 137 million.

Yes. And then one final remark. I mean, Harm excellent results in my view, despite the pressure on the top line. But the conversation on the potential recovery of the order intake basically came back every quarter in 2025. Some of my clients are not really happy with that because it's -- every quarterly update, it suggests that an order intake recovery is close by. And if you then -- basically it's not happening for four quarters for all kinds of macro reasons, which everybody understands it is better not to say that and just report the numbers because otherwise, yes, you're creating kind of hope. And the guys in the room, we have to model them maybe an upward recovery, which is not happening. It's not helpful. So better not do the statement.

I do understand that there is -- that people are really looking at the volume of order intake per quarter and the size of the order book to make a best guess on what is coming in the first period. We do understand that. At the same time, I would say that recovery signals are really there and that the -- but it is also pretty unclear. And what you can see in the financial results over '25 is that the performance was in our opinion, very good. And I think that is the most important part, right?

The -- if you perform well even with some top line pressure, then that stands out. But okay, point is clear. And I think we can restate that in the course of '26, the order book will improve. But indeed, it's, yes, taking a bit longer than expected, although we still have an order book. And so it's not that we're out of work, so to say.

Michael Roeg, Degroof Petercam. I have also a question about the Vision business. If I remember correctly, then consumer electronics is one of your larger segments. Do you see any hesitance among customers because of the turmoil in some of these consumer electronics categories due to the strong increase in memory prices?

No, I think that has not really an effect. What you see is that the driver for our Vision solutions in the consumer electronics production is mainly on new innovations on the consumer electronics side. So if you see changes on battery packing inside smartphones or when you look at foldable phones, et cetera, there are really new elements that need to be inspected, new technologies and new software developed where we are excellently positioned. I think that's more important than when you see the pricing effect of the consumer electronics going to the end markets.

Well, the thing is there's quite a big decline forecasted for smartphone volume, 10% to 15% decline and other consumer electronics categories are probably going to be going down as well.

Yes. But if you look at, for instance, EarPods, so the wireless connection for hearing that is an element where there are 0 memory chips in. And there are also some other elements in that. And also in these peripherals, we are very well positioned.

But again, all about innovation. So also in the EarPods, you see that there is a new battery technology involved, which needs a much more detailed monitoring and security related to the whole manufacturing process. And that is what drives our, let's say, growth in the consumer electronic market. It's the innovations that continuously ask for new Vision Technology to monitor what's going on during manufacturing.

Okay. Most of your Vision products are for inspection and not so much for recording and storage. So I assume that memory chips are relatively small within your bill of materials. Is that something you can quantify?

Yes. And where we do need memory chips, for instance, when you talk about machine learning, AI kind of applications on production lines, there, we have secured for a longer period of time, the pricing and the supply. So we're confident that it has not a material impact on our performance.

Okay. That's reassuring. Then I'm going to quote something from the press release. Within Electrification, we've solved the main challenges relating to the ramp-up of the subsea cable plant. Well, the word main suggests that there may be some smaller things left. Would you say now that you are at 95% of the desired productivity of the plant or 90%, something like that?

Let's say, the productivity has more potential than growth from 95% to 100%. It is more the stabilization of the manufacturing, which is at 95%. And that has been proven especially in the first 5 main processes, and then there are another 3 processes. And the last 3 processes, there was 1 process where we had difficulties with the larger dimensions. And that has been solved actually not before January. So we solved that in January with a major upgrade. And -- so that, yes, is -- we are now running at 95% of, let's say, perfect technology and the last 5% that has nothing to do with the productivity because we will see that we can improve. I mentioned already joining the same cable types in one manufacturing run. That is a huge productivity win, and that is not incorporated in the 95%.

Okay. So your month of February operationally was already even better than January.

Absolutely. Yes.

Maarten Verbeek, the IDEA! I'd like to have a brief chat about your largest offshore project, whereby you also have all kinds of services. If you break that project into 3, so prior to production and after production, have you now completed the first part of that project?

Yes, how do you find the first part? The first part, you can say, survey and let's say, moving away explosives in the field that is almost finished, I would say, at 80%. And in this year, the installation will start, let's say, mid of '26. And before mid of '26, we have to manufacture all the accessories and, of course, the cables to support the installation starting mid this year.

If the survey went well, and we do know that has depressed your added value within this segment, but the profitability was solid, as you always stated.

Bottom line, yes.

Does it mean that if we subtract that from the other offshore activities that, that was more or less still loss-making?

Yes. Because of the huge underutilization.

Then you had a very successful rate in the area. But lately, one of your competitors won the BC-Wind project. Do you know why you have lost that project against your competitor?

Yes. But I'm not going to explain that here. And I never mentioned that we would win 100% of the project. The original business case to come to an EBITA margin of around 20% is based on, let's say, 25% up to 30% market share. So we're overachieving there. And it's good to have also a good filled order book at reasonably good margins. And again, we are not yet planning a second plant. But I believe from the opportunity, we could overutilize what we have invested. But that's good. Let's first see that we utilize the complete plant and that everyone is smiling here in this room and all our stakeholders are having a big smile.

But you stated with production of [ Interra ], you can produce at the same rate level as your competitor, but your ESG rates are much better. Does that imply that they are now more or less offering.

No. We are still the only one who is offering the dry design cable technology, and we are really far ahead of competition, especially if you look at the bumpy road we had to go through since 2016 to get it, let's say, translated also in the right manufacturing processes. And -- but it's not just the ESG advantage. It's also the installation advantage, which is a big cost saving that can go up to even 15%, 20% of the total project price. So in some cases, it can be that you can use smaller dimension of cables, which have a substantial lower price than the higher dimension cables. And that is because of the ampacity we can offer with our technology, which is much more efficient than with the conventional cable types.

And yes, the USPs are really huge and not only related to ESG, but also to cost. We have a much lower transportation cost because we are in the Eemshaven and most of the contractors are close to the Eemshaven that can save on a project of EUR 15 million, about EUR 1.5 million if you have to transport it from another location. I'm not going to mention the location, but you can imagine which location.

Then I do believe last time you said you also want to expand more into defense. Can you provide a bit more information where you stand at this stage?

Yes, that is mainly related to our Vision Technology. And the application of that is in the situational awareness area, as you can say, we're engineered in when it comes to certain solutions and projects. So the actual volumes for supply will -- are still to come. But we expect already this year a positive effect of that in our Vision activities. And when you look at -- and I think that's quite obvious, the main focus for us is Europe and North America for supply.

And then lastly, on the -- still on the Tire Building, again, you mentioned we do expect order intake to improve in the course of this year. You also always have a certain lead time before you will start to produce. Does it imply that Q2 will also be depressed for you and then more or less earliest recovery should or could start in Q3?

I think if you look at production volumes, that is indeed in Q1, Q2 will be lower, and it's more back-end loaded when it comes to the results. I take the point. So we're -- how do you say that, actively monitoring the situation now. I think you're right. The second half will be better than the first half.

You still gave a forecast.

And lastly you mind, just confirm, you mentioned CapEx, tangible, intangible will more or less be similar to this year.

Yes. If you take out the special investment program, which we announced earlier.

Ruben Devos from Kepler Cheuvreux. I got a few small questions left. First one is actually on the Alliander framework contract. I think you talked about EUR 650 million over 8 years. So it's about EUR 80 million a year. That's quite substantial already. You also referenced framework agreements with other DSOs, which are not reflected in the order book. So curious about whether you could potentially size the annual revenue opportunity here because it feels a bit like an underappreciated structural growth driver actually.

Yes, the issue is what Elling already announced. We have to be really careful to already give -- disclose this information. So we will do that in the course of this year. So sorry that I cannot be more specific there.

For digitalization, I mean, if I look at the market, it doesn't seem to be in a very bad shape. Obviously, you've gone through a bit of restructuring and '25, as you said, was loss-making. But do you see '26 maybe more as an inflection year or still a bit of a restructuring? And I think you've talked about -- yes, I think you talked about Electrification, the fact that you wanted to have a solid run rate of profitability before maybe moving to the next step. Could you -- do you have a bit the same rationale for digitalization?

Yes. To start with, I mean, we have mentioned last year already that the digitalization is to be exited. That's no change. And that exit is independent as we communicated in the Capital Markets Day from the, call it, Electrification, Automation split. If you look at the market itself, I would say that on a global level, there is some dynamics, especially in North America is pretty strong, driven by data centers and also the trickle-down effects of the federal funds leading to more fiber-to-the-home initiatives. And that's pulling some capacity towards that region. But it also requires a lot of build American buy American concepts. We are not -- we don't have any plans to establish something over there. So our focus remains Europe.

And in Europe, we see that actually the volumes in and these are preliminary figures for '25, the volumes itself in Europe are minus 13%. So from that point of view, we look at a world where different dynamics in different regions takes place. But we are very well positioned. We have chosen from the beginning a market segment, which is really on the high end. What that means is that our fiber specifications are really in the top of the market. From the beginning, that has been the concept to be as much as possible away from the commodity kind of portfolio. And that fiber spec is in the end, also what is currently looked for within the data centers.

And data centers is one of the drivers, as I said, for North America. It's also something which will in Europe become a bigger kind of team. So there are some, let's say, elements which give positive sign. The question is how we get access to the right projects and how we do that. But I think portfolio-wise, we are in a good pace. '25 was a transitioning year. We mentioned earlier already in the second half of last year, everything was transferred in Poland. We are fully staffed. We have full running. Delivery times are going down compared to, let's say, a year ago. So from that point of view, I think we are in the right track at a lower cost base. It doesn't mean immediately we meet all the targets of TKH, but the transition '25, '26 is a positive one.

And the reasoning is basically similar in terms of timing, how you think about a potential divestment or separation of digitalization?

Correct.

Okay. Okay. Well, I think for Security Vision, I also have one question. Just I think you've mentioned a few times now that you're increasingly winning larger projects on a structural basis. My curiosity is what's really driving that shift? Is it mostly because of a different geographical mix? Are you upselling more software? Is it largely project deliveries? Like yes, how should we think about these larger projects as well? Like are we talking a few millions? Or is it already maybe EUR 10 million?

Yes. The largest project until now is EUR 25 million. And the success why we win these bigger projects is the integration of the technology that we can offer, the combination between mission-critical communication, Vision Technology, access control. And we are one of the few that has this offering and including the software to really being a differentiator and have a low risk profile for the potential customers to award us these larger projects. And we see also in the performance of these larger projects that we are, let's say, having a really well operational excellence related to also the profitability and the forecast that we made in delivering on time.

Okay. And the very last one for me is just -- I think you might have mentioned it somewhere, but maybe I missed it, but I think you talked about a EUR 15 million cost saving program at the start of the year? How much did you eventually realized? And what may be the aggregate cost savings embedded in the full year outlook of this year?

Well, we didn't announce the as a specific cost saving program. But based on the question of Martijn earlier, what were some incidental-related costs. This is in the basket of about the EUR 15 million. As I said, it's part in the Energy segment and the other half is more in the digitalization part. And that's basically the kind of element you should take with you. And of course, there are some further growth initiatives for '26, which will have a slight driven effect on the OpEx, but the EUR 15 million is basically what you should not see back in '26.

Martijn den Drijver for ABN AMRO ODDO again. On Vision, if I look at -- let me take them what Cognex, Rockwell, Honeywell, Keyence have said about 2026. If you summarize it, they're basically guiding for mid-single-digit growth -- organic growth. Would you be comfortable with that number? Or is that Germany component enough of a reason to guide for or be a little bit more cautious than that mid-single-digit organic growth that we see in the market?

I think the -- what they are mentioning is indeed reflecting what you could say, the growth in market and obviously, we're doing our best to stay there well positioned.

You've really learned well from Tijs now. Okay. Thanks, Tijs. It said in the press release, and you've also mentioned it in the Capital Markets Day that you were going to do this, the merger of the brands within the integration of the back offices, what the efficiencies that you were looking to realize? Did you realize that? And what does it mean in terms of lower cost or efficiency in 2026?

Well, what we -- last year, we made a big step in one of the entities where a German entity, NET was dissolved into -- mainly into Allied Vision and partly into SVS. And that leads to a lot of efficiencies. I think I'll refer to Elling when it comes to the pure financial side of that. And early this year, we -- end of last year, early this year, we announced the one brand for the 2D group as Allied Vision. And that was also received very well, by the way, early this year in the market.

I think if you look at the absolute figures, then we're talking about low single numbers with further upside going forward, but that's not '26. I think the other element you have to take into account is the additional commercial opportunities which come out of the integration as well. So the one brand and the one, let's say, commercial organization to the market and all these kind of things, that's where in the end, the benefit of integrating has to come from. It's not just a pure cost-cutting exercise.

No, that's true. That's true. And a final question on the Vision and linked to the capitalized development cost. If my memory serves me well, during the Capital Markets Day and also thereafter in the discussion, I think it was even in the presentation that there was a common platform that had been developed for both 2D and 3D. That was in place. The first products aimed at utilizing that platform were going to be introduced. So my question actually is, why are the intangibles being guided for at the same level? Because I would expect if the platform is done, you have done your work, then why do you need all these R&D and capitalized development costs?

Well, there are a couple of things. It's not that the whole R&D only works on one platform. There are much more portfolio elements, which are in the range of activities which they handle. And of course, the platform is not something which once you launch it, it's going to be like that forever. You always see the upgrades, et cetera. But it's a matter of allocation in time, which resources are being allocated to what kind of projects. And there's always a lot of, let's say, enthusiasm in these teams on what else could be done or should be done and has to be done. And that's an area where in the end, I think if you want to deploy your resources, of course, you have to be very careful, and we also highlighted in the Capital Markets Day that we want to bring the CapEx and amortization levels to be more in line -- that's not all in '26, but going towards '28.

So there has to be a level of prioritization coming through in the R&D projects to make sure that, let's say, the gap is closing. But it doesn't mean that completing a particular platform, then everybody is off the hook for tomorrow and everybody can go home.

A lot of things it was in software, so it was not a hardware platform. It was the integration through the software that we could use, have plug and play, the several technologies that we have in one system. So the hardware platform is a different ball game. And there, we are still on the move, especially related also to new end markets like the defense market. So that's a huge investment program that we have aligned with the opportunities we have in the defense industry where you have to match the specifications and some of these specifications are completely different compared to monitoring a smartphone in consumer electronic.

Maarten Verbeek, the IDEA!. A follow-up. You mentioned concerning the added value of Vision systems, you're more or less at a -- you made a huge progress over there, but you reached a level which you think this is a level which cannot be improved much further? Or do you still see that you can gain more in that respect?

Related to the Electrification.

No, no, Vision.

Vision. That's interesting for Harm.

Well, when you see a shift going more into the software proposition side and if you look at more recurring revenues from software, then there is a potential in the future to bring this figure further up. But I think the 62% is already a very nice achievement.

So we should not be too enthusiastic about further improvement in that respect.

No, I believe it's a very, really fair and very good margin. And what the improvement potential is in the further alignment of the portfolio. So we still have some commodity activities there in the security business, and we are -- that's on the divestment list of the EUR 250 million. And of course, that helps then to improve the margin, but that will be perhaps a few tenths and not percentage.

Maybe you already have answered my next question because you want to focus on Automation. You are seeking a new owner for your energy and digitalization business. Are there other business units within TKH, you still like to bring to another owner?

I mean we have in the Capital Markets Day included the sheet, and it's also in the handout which you have, and it will be also on the website as part of the presentation, which we gave today, where you can see that in some of the segments in Automation and Electrification, both have what we call a, I'll put it blunt kind of noncore or other business, which in the end will be exited. And that's independent, as I said, from the big separation topic, Automation, Electrification. And that agenda has not changed. The majority of the basket I referred to is, of course, within the connectivity part. The biggest there is, of course, the digitalization basket, but there are some other bits and pieces.

And the other bits and pieces, do you expect that to be completed this year, that program?

I cannot give you a guarantee on that, but we are working on getting things executed.

No questions anymore. Then I'd like to thank you again for being here, but also for all the time you invest in TKH, which is not an easy case, I believe, to do your analysis in the right way. So that means that you need to spend a lot of time. And I really appreciate for that also in the name of my colleagues. Also, I'd like to thank everyone in the webcast for participating, and we will come back in beginning of May with our Q1 results. And after that, we have our Annual Shareholders' Meeting. I hope to see you certainly again during roadshows or in August with the presentation of the half year results. Thank you very much.

Hello, and welcome to TKH Group Q3 2025 Market Update Conference Call. My name is George, and I'll be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions]

I'd like to hand the call over to your host today, Mr. Alexander Van Der Lof, CEO of TKH Group, to begin today's conference. Please go ahead, sir.

Good morning, everyone, and welcome to the conference call for our Q3 update.

Before we move into the remarks to the result, I'd like to point out to the cautionary note regarding forward-looking statements.

Yes, going into the market update. We have seen a strong growth of 8%, mainly driven by Vision Technology and the Electrification activities. Within Automation, we saw a strong performance in the Smart Vision on the back of a stronger market demand and a decline in Smart Manufacturing based on the lower order intake and strong comparison base. Electrification was up strongly, also with a strong increase in the demand in the Onshore Energy segment. Contribution of the services activities in the Offshore Energy segment contributed very well and the technical issues in the Eemshaven plant being largely resolved. Q3 output was still limited due to release of new cable types that we had to start up and the finalization of type approval tests for the upper bandwidth of the product range that we need to manufacture for upcoming projects.

We signed a new contract for 140-kilometer inter-array cables for the Gennaker offshore wind farm. And so that is a good progress for continuation and for our order book. Dewetron was divested -- the divestment was closed in October. Total turnover divested as of 2019 is amounting to a substantial amount of EUR 458 million. A further EUR 250 million in non-core turnover will be divested, including Digitalization. And going into the EBITDA, we saw a minus of 6.4%, which was mainly to a higher cost level and at the connectivity business, especially the offshore wind and not yet at full utilization.

Then we move to the 3 segments. Within Smart Systems -- Vision systems, we saw an organic growth of 11.4%, improved performances in both Security and Machine Vision. Within Machine Vision, 3D Vision performed very well, benefiting from several well-performing end markets, including the consumer electronic market. Security Vision's turnover increased due to delivery of some larger projects as also announced in the previous communication. Smart Manufacturing, we saw a turnover decrease of minus 8.9%. And the turnover was mainly lower due to a strong comparison base towards Q3 last year as a result of the catch-up effects. And besides that, the lower order intake in the previous quarters had an effect on the volumes that we were able to manufacture. The order intake in the quarter continued to be impacted by geopolitical circumstances, and we will come back in the outlook what the future looks like.

Smart Connectivity Systems turnover increase that was really substantial with 21.2% organically. The Offshore Energy benefited from the ramp-up in Eemshaven and increased accessories and services turnover. Production processes of offshore inter-array cables in Eemshaven stabilized further and planned changeover to different cable types and type tests approvals impacted in the end, the output and utilization. The higher cost base due to the Eemshaven plant being fully operational impacted the EBITDA. Growth in Onshore Energy from increased demand foreseen to continue in even the coming year. It looks like we are fully booked. Digitalization, we still see pressure on volumes and pricing from oversupply in the European fiber optic market.

Yes, then we move to the outlook. First of all, we reiterate the outlook. Then going to the 3 divisions, we see within Smart Vision systems that it is expected to continue its strong performance. Turnover and adjusted EBITDA in the second half of '25 are expected to grow compared to the first half of 2025 on the back of the delivery of some larger secured orders within Machine Vision as well as in Security Vision.

Then within Smart Manufacturing systems, as anticipated, H2 turnover '25 and adjusted EBITDA are expected to be lower than in the first half of '25 due to the lower order book, although we have not seen an increase in our order intake in Tire Building systems in Q3. We continue to expect an improvement in the coming quarters.

And then we move on to Smart Connectivity systems. Turnover and adjusted EBITDA in H2 are expected to grow substantially compared to H1. A higher output level is projected in the Eemshaven factory, contingent on continued stable production processes. In addition, we expect further turnover increase in offshore accessories and services. And furthermore, in Onshore Energy, we anticipate a further increase in demand from the network companies that support higher utilization levels.

Within Digitalization, a lower cost level and high utilization will also support an improved result.

And then finally, subject to ongoing market uncertainties and bearing unforeseen circumstances on balance, TKH expects turnover and adjusted EBITDA for H2 2025 to be substantially higher than H1 and to be above H2 2024.

So far, my comments to the results. I'd like to hand over to the Q&A.

[Operator Instructions] Our first question today is coming from Chase Coughlan of Van Lanschot Kempen.

Maybe starting on the guidance. I guess it's more of a semantics question, but you reiterate the substantially higher comment. Could you give an indication of sort of maybe in some form of quantitative terms, how large that substantially really is? I mean I know consensus is expecting quite a pickup now in Q4 from a profitability standpoint. But of course, if the sell-side expectations differ a lot in terms of how we're interpreting that substantially, then there might be a mismatch there. Could you provide any more color on that, please?

Well, Chase, this is Elling, by the way. With regards to this substantial, it's very much related, of course, to the comparison with H1. I think the second part of the guidance refers to at least the same as H2 '24. And I think that gives you a little bit of guidance at which level we at least should be landing for the second half. So that would be EUR 108 million EBITDA for the second half this year to match at least the similar level of '24 H2.

Okay. Great. That's very helpful. And then my second question would be on the Manufacturing business. You just flagged in the press release now that you expect, let's say, order intake to improve in the fourth quarter despite not really seeing any inflection year-to-date. What is providing that confidence for you?

Harm Voortman, here. When -- I think the most important part is the fact that orders don't come in just within weeks. It takes months for preparations and engineering meetings. And all the projects that we are discussing right now will lead to orders in the coming period. So when you look at the current projects that we are all working on, we expect an increase in order intake in the coming quarters.

Okay. Great. So it's more based on the conversations and macro improvements or something like this?

Yes. It's actual projects that we are discussing.

We will now move to Martijn den Drijver of ABN AMRO ODDO BHF.

Operator, it's a difficult name, I realize. I have a few as well. On Smart Connectivity, you mentioned that the problems in subsea have been largely solved. What is the issue that remains? And secondly, you mentioned these type approval tests and probably equipment resetting. Is that going to happen more often? Or is it exceptional this time as it's the first time that your manufacturing shorter came on? I have some few other questions, but I'll take them one by one.

Yes. Thank you, Martijn, for your questions. The issues that we see are, let's say, normal issues that you see in a new production plant, and it could be a sensor that fails and yes, small things that are not related to the technology that we have in the plant, but more related to issues that can happen in a new plant because everything is new.

And then related to the types, yes, we have to move through the range of types that we have to manufacture, and that is a total of, let's say, around 10 different types. And yes, the changeover times and the setup that takes, let's say, at the start of the move into new types a little bit longer than that it normally will take. And yes, we are, let's say, at around 50% of the types that we need to manufacture now. So that will also ease out in the coming quarters.

Okay. But it is -- if you've done the other 50%, then after that, you don't have these hiccups as you've had now had in this particular quarter?

Yes, it will continuously improve. Also, there's a learning curve from the setup and all the challenges that you get and especially moving into the higher square millimeter cables. So we are now manufacturing even 1,000 instead of the 630 we had in previous quarters and had the challenges more when you have to move upwards. And yes, it looks also with the 1,000 square millimeter that we are, let's say, managing now the right output and without issues.

Got it. Moving on. Alexander, I thought I heard you say that you are almost fully or fully booked. I assume that relates to 2026. So based on what you have in your order book right now, you can achieve the targeted 600 kilometers in 2026? Or do you need one or more project wins? It wasn't quite clear.

No. With the latest win of project Gennaker, we have the order book to manufacture at least 600 kilometer. So we also see a small shift from '25 into '26, and that is also supporting to even perhaps get above the 600. But let's say, the 600 is the target we are looking for in '26, and that order book is there.

Got it. And then on the optical fiber activities. Can you update us where you stand on that transfer and the whole optimization? Has that now been done in Q3? Or will there still be a tailwind of that process in Q4?

Now the transfer of capacity into the location in Poland has been completed. So from now on, we are in the stage that production getting into a more normalized level and at the right volumes. So you will see in the coming quarters, the pickup -- or the effect of that completion coming through.

Got it. And then moving on to Smart Vision. Very strong organic growth in Q3. Can you talk us through the trends throughout the quarter? And also given the order intake, although that's not been disclosed. What we should expect for the near term for Q4?

Well, I mean, if you look at the organic growth there, clearly, we have highlighted also that Machine Vision and especially 3D had a strong quarter. You've seen some of our competitors also, let's say, moving at good growth rates. I think there's some good sentiment in the market in quite a few areas at least. So the market segments where we have a good share and a good position like in consumer electronics and battery inspection and a few more, but of course, the wood industry, not to forget in North America. These are key markets, which have proven to be very solid in not only the third quarter, but also in the earlier part. And that's something where we think also for the, let's say, near future, a similar trend can be seen.

I don't want to give a full outlook for '26, but I think we are very well positioned for growth in this segment. That's on the Machine Vision side and similar on the Security Vision part, where we have -- in the past, we mentioned quite often that -- some of the growth was driven by larger sized projects. But what we currently see is that in the last couple of quarters, we consistently have larger-sized projects in our books. And I think also there, we see that with our proposition, we are able to get access on a more structural level to the larger sized projects. So hopefully, that's also going to be a kind of fixed part of the growth trends, which we can see for the coming quarters.

Got it. Got it. My final question is on divestments. Can you talk a little bit about how far you are with the equity carve-out of digitization and possibly also some comments on where you stand on the other divestments. Have those processes started yet? Or are you going to do them one by one?

Well, first, to start with the Digitalization. I think an important element is referring to your question earlier, what the progress is we are making. As I mentioned, as we see that the proof points of the improved structure and setup of our especially fiber optic activities is going to help us, of course, to get on the part of the execution of the divestment. But also there, we want to have certainty or we want to make sure that these proof points are actually getting back into a proper valuation. So it's not something that we will have executed, let's say, tomorrow, but it's definitely on our list.

With regards to the bigger question, when we talk about the, call it, the new ownership structure of Electrification and what we presented in the CMD. Of course, I mean, that's a couple of weeks after the CMD, but we are executing this in full force with full commitment as we're working on the carve-out related issues. It's a little bit too early to give more comments on where we actually stand, but it's in swing, let's call it like that.

[Operator Instructions] We'll now move to Tijs Hollestelle from ING.

Harm, I got a follow-up question on Chase's first question. If I look at my notes from the August meeting, it's stating that the so-called sales funnel and the order pipeline looks very good for Smart Manufacturing. And there was also a comment that orders arrived just outside of the second quarter, but it seems it didn't have a real impact on the third quarter. It is now November. So is there a trend that the tire OEMs place orders towards the end of the year? Is there a kind of budget management effects?

And then a second question in this one is, how does it come that TKH is so often wrong footed by talking to clients about these orders?

Tijs, thanks for your questions. The first one, it's not a trend that based on budgets that customers place orders at the end of the year. It is more an effect of what is -- you could say the disturbances in the whole economic environment in the tire industry that is causing hesitations over here and there and calculating business cases based on import duties that change overnight that makes that decision taking -- decision-making processes take a bit longer time. So that is, I think, more explaining why expected orders and projects that we actually were discussing in the first half of the year were delayed, and that is moving ahead.

I would -- I do not completely recognize your statement that we are always wrong footed on the expectations on order intake. We are still confident that the larger amount of projects that we are discussing will result in firm orders in the coming period. And we mentioned that in August that we had a lot of so-called handshakes. But to convert that into orders, specifically when it comes to new factories, greenfields that are located outside countries where customers already operate that takes here and there some more time. So it's just a delay effect.

One side is the hesitation that was in the market in the -- certainly in the beginning of the year. And secondly, to change the plans and move them forward that takes some time. And it's still not at the end of the year. So I think we're still confident that it will result in work. But yes, it is, of course, a fact that in Q3, we did not really see the uptick. But the project move from Q2 definitely went into Q3. So that -- I think that part is still good.

Yes. Okay. So is it fair from my side to assume that, let's say, if the macroeconomic uncertainties continue that, let's say, actual signing of orders could also take place at the end of Q1 or maybe even Q2 next year?

I think the orders that we mentioned or indicated in August, those are not related to the macroeconomic circumstances. That is more the complexity of greenfields to start that up. So that takes time. And -- but indeed, if you talk about the total improvement in the situation, for instance, at the Tier 1s, that is obviously more related to the automotive industry in general and the macroeconomic circumstances. It is clear that longer term, customers really have to invest in new technology also when you look at the sustainability, when you look at all these developments. So longer term, it looks still very good. But on the short term, we are facing, yes, the disturbances that we currently see in the market.

Okay. That's helpful. Yes. And then the second one is also basically a follow-up on Martijn's question. That the EBITDA guidance, specifically for the subsea business above 17%, is that now based on, let's say, a theoretical EBITDA margin executing the factory on full utilization at a full production, so not taking into account switching costs back-to-back production gaps, testimonials, any specification controls from the clients. So meaning that in reality, the way we look at it from the stock market that you cannot reach, let's say, the 17% EBITDA margin on a 12-month basis?

Yes, we always have to take into account that there will be some changes in specifications. So that is normal business, I would say, and that will also further normalize. It has normalized already in Q4. And so our guidance will be based, including this kind of disturbances. But it has been more extreme and above average in the past quarters.

And how many different projects do you expect to produce in 2026?

I believe that will be 5.

Right. And back-to-back...

Sorry, part of that is continuation of the projects in '25. So if I look at really new projects, I believe it is between 2 and 3.

Yes, you can do it also next to each other.

Yes, absolutely. Yes. Yes.

Okay. Okay. That should smoothen it out a bit. Okay. Yes, that's helpful. And then yes, a final question referring to the discussions during the Capital Markets Day. I think this question is for you, Elling. About the future divisional reporting structure, have you already, let's say, decided to maintain a separate reporting with all the details as you currently have for the Manufacturing and the Vision division?

Tijs, I always listen to you and your colleagues. So look forward to the disclosures in the future.

Okay. I take that as a positive, that it remains as it is today.

You will not be disappointed.

We'll now move to Maarten Verbeek of The Idea.

Maarten Verbeek of The Idea. A couple of questions. Also like to get very briefly back on the order intake. So if I understand you well, we are talking simply about a delay of signing and no cancellations or no downsizing of orders.

Yes, what we are currently discussing are projects, and we're already doing that for quite a while where, as I indicated, if you look at the sales funnel end of last year, when you look into '25 and had your expectations and discussions, there you see that indeed, the projects have shifted in time. And yes, so that I would say it's not canceling, but those projects did not materialize in '25. So the total effect is indeed a lower intake in the first quarters and the outlook is for the -- certainly for the coming quarters is very good.

Okay. Could you say anything about your operating expenses for Q4 because you mentioned that still you have elevated cost at Eemshaven. But when you start to produce, I believe that incremental costs will be minimal. So looking at Q4, your operating expenses will be only increased moderately.

That's correct.

Okay. Okay. And then looking at the CapEx expectations for this year, that still stands at some EUR 20 million for the second half?

On the tangibles you referred to?

Yes.

Yes, that's roughly more or less where we stand.

Okay. And then lastly, with the developments within the offshore industry, no surprise [indiscernible] did not have any bidder. Apparently, there is modest appetite for the [ IRS7 ] in the U.K. Your sales funnel in the inter-array cable, has that changed during the quarter?

No, that has not changed. It's still very positive and in line with what we disclosed at the Capital Market Day.

Next question will be coming from Thibault Leneeuw of KBC Securities.

Somewhat of a similar question with respect to the offshore, a company pretty early active in the supply chain also mentioned for the first time, lower demand in Europe. Other companies have been mainly focusing that the Americas that the demand for offshore was [ weak ], but it does seem like the project Maarten just mentioned that was canceled in Europe or that there were no bids for. How are you seeing the development right now in offshore? Because it does look that the supply chain even in Europe, especially the early in the supply chain that demand has weakened a bit. So my first question is with respect to that.

And then the second question is basically with respect to the Q4 EBITDA outlook, given that you assume a better performance than second half '24, you need a very significant step-up. I assume this will mainly come from the connectivity, but there is a EUR 30 million -- at least a EUR 30 million step-up compared to Q3. Would you be able to quantify where this exactly is coming from? Some will come from OpEx, some will come from higher revenues. Will this all be driven from the Connectivity segment? Those are my 2 questions.

I will take the first question. And yes, we have seen that some projects are, let's say, postponed. I would say they are postponed. They are not gone. And also important to remind you that we have a very high market share. So I reconfirm that we are above 80% market share at the moment. And I mentioned in previous meetings that, that will not be our target for the future because then we have to build 2 additional plants, and that is not in our plan.

But that gives a lot of additional headroom that if projects are moved, we are still quite safe, secured that we will be able to have the right utilization in our plant. And we have not targeted in our business plan to move that to the 1,200-kilometer capacity. For the medium term, we have -- we see that we will move above 700 kilometer and that looks still very, very comfortable in respect of the total amount. I don't have the detail, but I believe it's even more than 14,000 kilometers. We are, let's say, in quotations and in negotiation. So yes, that's a really big headroom. So I believe it will not have a negative impact on TKH if there is a project that moves a few years or even some projects that would be canceled.

With regards to the second part or the second question you had about the guidance of the EBITDA for Q4, you're quite right that, of course, the biggest part of the growth has to come from the connectivity part. The question if it's OpEx or other items, we already mentioned earlier that OpEx is not the main delta towards Q4. It's very much about, on one side, the output. So the related added value contribution in the fourth quarter coming out of that as well as we highlighted at the half year meeting that part of the H2, and that's also in the fourth quarter, part of the revenue is coming from services and accessories, which will be part of the revenue stream in the fourth quarter. And that causes -- this combination causes for a substantial increase also in the Smart Connectivity part if you look at the prior quarters.

[Operator Instructions] We do have a follow-up question coming from Maarten Verbeek of The Idea.

It's Maarten again, quickly one additional one. You mentioned you were quite positive for the short to midterm on your onshore cable activities even you mentioned that you were sold out, if I understood you well. Is it particularly driven by demand in the Netherlands or your expansion abroad?

It is specifically driven by the Dutch demand and from several customers in the Dutch environment, in the Netherlands.

Sorry, is there no risk that these projects once again in the Netherlands will be postponed due to all kind of nitrogen or whatever regulations or opposition?

I believe that would be strange because they are today in a flow with a much better performance and having found solutions to work around the previous issues that were there. And I believe it can always improve further the permit situation. And yes, again, we are further preparing on growth also outside of the Netherlands, and that looks really positive. And also, as mentioned in the Capital Market Day, we are really in the sweet spot there up to 220 kV. And yes, there is a high desire from TSOs and DSOs abroad to work with us. And so we are, of course, looking also to further grow our capacity. We have still some room there also in combination with the Eemshaven, and we will address as much as possible that we can realize.

But the strong demand from Netherlands is not holding you back to expand abroad?

No. No.

We have another follow-up question. This time again from Martijn den Drijver of ABN AMRO, ODDO BHF.

Just coming back to Maarten's question. The Lochem plant had a recently installed production line. So when you mentioned that you're almost sold out, is that including that capacity? Or was that still only older capacity that you had? Just wanted to clarify that.

Yes. I believe it's a good question. We are sold out in the medium voltage. And in the high voltage, we are not -- by far, not yet sold out. We made good progress this year with high-voltage projects and mainly in the area where we did not yet need to use the new installed capacity for the stranding of course. And that is more future related where we move up further into higher square millimeter cables where you need different cable construction. And by the way, we have our type test realized on the, let's say, equipment that we have now installed. So there, we see not an issue that there -- that could happen with, let's say, not stable manufacturing or something like that.

Got it. And then my second question, it's a minor one, but can you talk a little bit about Parking because I watch these LinkedIn posts. And it seems like Parking has been doing reasonably well. Can you update us a little bit about the Parking activities, especially since it's probably part of the divestment plan?

To be honest, it's not part of the divestment plan. It is a fully integrated activity within the Security Vision business, where we supply many, many technologies in the Parking garage environment with high profitable -- profitability as is also the case for the Parking guidance system. We automate the Parking garages, and that is probably what you also continuously see and feedback in the posts that we are making. So we really recovered that activity, and it's on the move. We have in the order intake, some projects that are more than EUR 10 million. And yes, it is part of the strategic position of the, I would say, Smart Security vision. And also AI is an important solution there for automating, let's say, the environment of Parking. So it's really a strategic asset in the Automation business.

I stand corrected. And when you mentioned highly profitable, should we be thinking about the targeted EBITA margins for Electrification? Are they -- excuse me, for Automation, are they in line with that?

Yes, I believe they are quite in line with that. We have a very high added value also in this segment. We changed a lot in the technology to lower our cost price to get a better performance per unit. And I believe really, really good innovation in that segment that it is not -- it's a well-performing activity.

As we have no further questions at this time, Mr. Van Der Lof, I'll turn the call back over to you for any additional or closing remarks. Thank you.

Thank you. Yes, we are full focused on our execution, especially, of course, Q4, but also preparing for 2026 with all the actions that we have in place related to the Capital Market Day. And we are really excited about, let's say, moving forward. And I'd like to thank you all for the questions, good questions that have been asked and also being in this conference call. Thank you very much.

Thank you very much, sir. Ladies and gentlemen, that will conclude today's conference. Thank you for your attendance. You may now disconnect. Have a good day, and goodbye.