TKH Group Aktie

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.

Good afternoon here in the [indiscernible] here in the Amsterdam. And also the audience in the webcast, a very warm welcome. We believe we have prepared some very interesting presentations. Most of you will have seen the press release already this morning, where we announced to be active focusing on automation. Before I move into the presentation, I'd like to point out to the cautionary note regarding forward-looking statements and hope that you can read this very quickly and take it also seriously.

Yes, we are proud with what we have developed at TKH Group had next-generation technologies that make the world more efficient and more sustainable. And that has not been an easy job to create that. And I hope we can make that more clear during the presentation that we have. We will have presenters from the business responsibility in the group, so that you also get to know more people than just the Executive Board. We also have a few videos. In these videos, you will also see some people coming from the operations to explain and clarify activities what we are doing. And I believe they can do it even much better than that we can do that as Executive Board. And what you can see is they really do that by heart. This is the agenda that we have on the screen. It was already in the pre-announcement. I will take the first part, then Harm, Jeroen and Mark will take over for the second part.

We have a short break, and then we move into the electrification. And last but not least, Elling will conclude with the Execute and 2028 and disciplined capital allocation. And I believe, especially that is also really, really important in the next phase for the TKH Group.

Yes, the key messages I already pointed out, TKH future is in automation. And I believe that was somewhat unexpected. On the other side, we already have been working on this for quite a while to prepare this to prepare that we can split up that we have very strong potentially stand-alone activities that can build further on the potentials that they have. And that is, of course, the electrification and for the future, the automation business.

Capitalize on automation and electrification. Very important that after all the investments that we did in the past, I would say, a few years and not a decade, but especially the past few years, in R&D, in Smart Vision, in smart manufacturing, in R&D also within electrification, in market positioning to be able to grow our market, to create an additional addressable market, which is really, yes, a nice opportunity within the TKH Group, how we can go beyond, I believe, especially in the presentation of Mark Radford. You will see a few slides pointing out to what we are doing and have done with the additional addressable market in the past few years. And it's also really organizing the return on investment on all the investments that we did, R&D, but also especially the capital investments in the additional production capacity within electrification.

Disciplined capital allocation, really, really key and should turn and have focus on cash conversion and as much cash generation that we can achieve and not by disturbing our business, but again, also be flexible with the capital investments that you need to do that if a certain market is coming down that you immediately also reduce your capital investments. And I believe that is not what we did in the past. Elling has a really key role in that. But I believe the commitment from all the MDs in the group is at a very high pace and level to support this. All the noses are in the right direction to make this happen. And then last but not least, we have the continuation of the noncore divestments. In the press release, you can see that it's accounting for about EUR 250 million. The majority of that is the digitalization business. And -- but we have added a few other activities to create further focus as that is the real key for the future of TKH that we need to be and have to be focused to get, yes, better returns than that we had -- that we even had in the past.

I go to the next slide. We have had 2 programs in the past 7 years. The first program was the Simplify program, and I will come back in the next slide. I believe, a very good program to get more focused already. And yes, on the other side, you could say you have been quite slow because you are still in this transformation. But I can tell you, it is also intense to find the right owner structure, at the same time, have the right pace in all the investments in the future, where you want to invest. And that has led to the second phase, the accelerate phase that we started in the end of 2021. There's a very high focus on creating the right building stones as I already mentioned, larger addressable market, the right R&D technology propositions, the investment, the CapEx investments in electrification to get there, to a next level to go beyond their in a much larger market that we can address after the investment in all these activities.

To point out here is, I believe, also important to the return on sales target. We have not been able to realize that. The potential of realizing the target is still there. In that respect, we have really, really sound business in the electrification and especially in the automation business, where we see also that the margins are at the highest level and especially the gross margin, the added value is way higher in that segment, and I will come back in the next slide with the -- related to the development of the added value in the past 4 years which is, I believe, quite amazing. And it's also giving you already the flavor that if you translate the added value in the right way, with the right cost conversion, that the potential for a much higher return on sales is there. Of course, we are disappointed that we have not reached that, but we are going to do our best in the next phase to show substantial increases in the return on sales.

Here, again, a quick overview of everything that happened with the transitioning into smart technologies. And I'd like to point out here again, also to the Smart part. This morning, we were in the Mondriaan Tower. And there, we have a great department with many AI -- intelligent AI people, and we are very proud of them. It is not the only department where we have AI people, we have more AI people in the group, but it's really key to make the difference when we want to go further and develop in the right way within automation. And especially Harm will come back there with also the great opportunity that we have for autonomous production. And there, you will also see coming back, the synergy, the big synergy that we have between the vision technology and the automation -- automated production under which we also see VMI. But we are also going beyond in that respect with the production of systems to automate the world.

The next slide, we see that we still had a quite nice organic growth. And we have -- we are not satisfied with that. We have had really a lot of headwinds, destocking the fiber optic business, supply chain shortages after a nice peak in demand in 2021, big supply chain shortages in '22. Yes, we had to win a race. And some of you might know, I'm a racing driver, and love many cylinders. But even if you are driving a 12-cylinder and 1 cylinder is missing, you cannot be in the top 3. And that is a big driver for us also to see that we get TKH running on really all the 12 cylinders and preferably less cylinders, but still at the maximum of the number of cylinders. Here, we also point out to the added value coming up from 47% to 51%. That's really substantial, 4% points in such a short period. It also is happening because of the movement into more automation. And you can see that in the graphs here also on the slide that the automation part is today around 60% compared to '21, where it was around 50%.

Yes, the next phase is Capitalize & Execute, not too nice stories, not too much optimism, you see that we can really get the returns out of what we have. And that is not for the coming 5 years. It is for a relatively short period of 3 years to have that focus and to deliver in that respect, the returns that I believe and unlock value that our shareholders also are greatly looking forward to. Again, here, on the left side, you can see in the graphs, the development from the automation business that it has become now the majority in our activities. And we are moving into a new segmentation. I will not deep dive in that. Elling will do that. We transformed the Smart connectivity into electrification and we show in this electrification, the digitalization, which is on the divestment list. And then, of course, the electrification not too long from now, consist of only pure electrification activities which should make it also a very valuable activity, for which a lot of interest can be generated in respect of interest and also potential valuation.

And then, yes, a very important slide, where we have the segmentation already in the new segments, as I just discussed, that is the middle chart. And we have changed the smart manufacturing into automated machinery. I believe that is the right pronunciation, clarification of what we are doing. And yes, we are strong entire building. But we can really go beyond in the automated machinery. What we see already is in Smart Vision that we are moving up the chain from components to systems, to solutions. And we believe, and Mark Radford will come back more in detail there, how important it is and what we already have achieved to move in the solution direction.

And with the solution direction, we also increased the opportunity of delivering a wider scope. And a wider scope means also more turnover and more profitability that we can generate from the same customer. And then there's an explanation, I'm not going to walk through that in detail. But we know that the automation business is an asset-light business. We want to keep it also that way, and that also means from a value creation perspective, by focusing that and also reinvesting the money that we generate from the divestments in this activity into a buy-and-build strategy gives the highest potential I believe, in valuation, but also in performance towards our customers and I would even say a supplier and to go beyond and to meet the targets that we have set.

So we have decided for an alternative future ownership for the electrification and we have not mentioned directly already what the route to go is. We see more options, and we want to evaluate in the coming 1 or 2 quarters, what the best option is. What is very good is that the electrification activities are already moving into the right direction with respect to profitability meeting being close to the target that we set in Q4, and that makes also the gap towards 2026, much smaller than if you look at the first half of this year. So it's not that we need to wait a very long time. We, of course, you can optimize and see that you get the maximum result in 3 years or in 5 years, but we have decided that we will already make such a big step in '26 that we should not wait until '28. And you also know, you never know what will happen. And I believe it is also important that we generate the cash as quick as possible to stimulate everyone in the automation group, who are really ready for the next phase and are excited to get access to the funds. Although Elling is protecting that in a very strong way, we see capital allocation, share buybacks, dividends and perhaps we have not put share buybacks as the highest priority because it's the #4 on the list. But again, Elling will explain that, and that is also, especially with the current valuation, a very good potential investment for TKH.

Yes. Then the last few slides, and then I will close my presentation. That is, of course, the automation, what have we built in the automation activities and again, it is about superior developed technology and that makes life a lot easier. If you have really differentiating power from your technology point of view, and I believe we can guide you much more in what we have in our hands during the afternoon. But that makes life so easy to be able to gain market share and not only be depending on just the market growth, although we have in the automation segment, very good drivers, which we see here on the left side that stimulate higher productivity and higher investments in automation.

In electrification, it is, yes, very good. And Walter here will come back to that. The big success that we have with the offshore wind generating more than 80% market share at the moment. That is not a guarantee that it will stay at that level. In the presentation of Walter, we will see that the sales funnel has increased from mid-August, the half year presentation from 11,500 to now even above 14,000 kilometer, and Walter will also inform you where that is coming from. So although there is a lot of negative news about the offshore wind, today, we see some shift, and that will also be in that presentation of Walter of investments to a later stage in this decade to more to the end of this decade. But that does not mean that there is no demand starting from the coming year up to 2028. And to utilize that is very important that from that, we get our cost ratio in line with what it should be. So we don't have to add any cost anymore in the electrification business.

We are going to utilize the capacity that we have. We have a full order book in the onshore medium voltage, low voltage business that's going up to the end of 2026. And we still have capacity now for high voltage, which is mainly in our Lochem plant. But the destocking that is very good, that we already could announce that at the half year result that has disappeared, and that -- yes, the investment level is at a much higher pace than it was even before the destocking period. And so our focus is to generate as quick as possible, a substantial value for this activity. And to be able to support the buy-and-build strategy within automation. Here, we have the targets and execution. I already mentioned most of the parts in this sheet. So I'm not going in detail here. Elling will address this slide and I move to the next slide of the disciplined capital allocation and no major CapEx programs, very important.

We don't need them. We can build on what we have for at least 2, 3 years. And that means a huge change in, of course, the cash generation. Buy-and-build strategy in automation and not very large acquisitions. First of all, we don't have the excess cash at this moment, but we also believe that bolt-on acquisitions can be a very good strategy. You can increase the number of bolt-ons and reduce the risk by having a very big acquisition. So a big acquisition is not today on our list. And then the payout ratio to our shareholders will continue to be at 40% to 70%, but we have put a kind of mix there related to the dividend yield. And so if the dividend yield and that means if the dividend yield is very high, you could say your share price is very low. It's not always the case, but I believe in the majority of cases, that will be the case. So we have put a limit of the dividend yield at 3% and excess will then go -- will not be distributed in dividends, but will go then into share buyback. And of course, we don't want to do share buybacks if our leverage is close to 3.

Then we go to the targets. Yes, 2 targets for the 2 activities, specific targets, Elling will come back also more in detail. You have noticed it already in the press release, organic growth in the automation perhaps looks low. We have incorporated there that within the manufacturing area that the order intake is not running at a very high pace. We still see that the Tier 1 customers in the tire building industry are hardly investing and that is already going on for more than 2 years, and we have not put a very optimistic return of the Tier 1 in the coming 3 years. And that depresses somewhat the organic growth that we see in Smart Vision which will be at a higher level, and we also will disclose that in that way, that it will be higher than 5% to 7%. And in the manufacturing business, it will be lower than the 5% to 7%. But again, if the Tier 1 comes back, it could look much more positive.

Then I'm not pointing to the return on capital employed, but of course, that is really key. Organic growth is important to achieve that and be organized for that and again, had a focus on the return on capital employed, and we will have a slide where we show what developed -- how the return on capital employed developed in the past 7 years. And yes, the outlook is, I believe, much better starting from today what we can achieve in the coming 1, 2, 3 years. Organic growth within electrification is quite good. And even at a high level at automation, again, mainly related to very good order book that we have there already and the capacity that we have available.

And then I come back to my first slide. I'm not going to repeat everything here. It is clear that this is our focus. We will not be, let's say, distracted from this. We keep really close track on, I would say, even a daily basis, a weekly basis, and show the right execution and capitalization on what we today have in our building stones. Thank you for your attention, for my part of the presentation. And I'd like to hand over to Harm, who will move further, deep dive further in the automation business. Thank you very much.

Okay. A very good morning also from my side. Thank you, Alexander. And we will now shed some more light on our exciting view on automation, and we would like to start with a short video.

[Presentation]

In our view, automation will remain extremely important in the industry and in the world around us. If you look at the key drivers for automation, I think a lot of you are familiar with that. You see that on the right side. Some numbers. Clearly, it has to do with scarcity of skilled personnel. And that will certainly become even worse in the -- if you look further ahead at the demographic figures. And that means that with scarcity, obviously, your costs go up, but also the scalability of your production is at risk.

But there are more drivers for automation. One is mentioned here on the left side that has to do with the materials change. There's a lot of pressure on raw materials, scarce materials that will be more and more replaced with more sustainable materials. And the scarcity and this change means that it will be very helpful if your production becomes more precise, more predicted and that waste levels go down and that all can be achieved with a higher level of automation. So this leads to a -- what we have seen already. You see here, for instance, the number of installed robots in the industry already for quite some automation. But in our view, it doesn't stop at automation. We have seen manual labor from the past moving into what we now see as automation. You have operators working with highly automated equipment.

But the real next step is autonomous production, the dream of the dark factory, where machines can work, can do the actual work where the machines can also take decisions and act and make this whole production facility not dependent anymore on -- no influence anymore on quality and output of people. And if you achieve that, then you see that on the right side, you can get a higher quality at higher speeds at lower cost. And as the system can also learn from the past, it will become better and better over time, and it is scalable. So if you're very successful, it's easier to scale this than with more people.

But what is needed for real autonomous production in the end. In fact, 3 key elements, you see them mentioned here. One is replacing the eyes-off the operator with vision. The second is the hands-off. Of course, you need machinery, you need robots, you need systems to do the actual work and you need the brains, the smart software that can analyze the images, can come to conclusions, take decisions and steer machines to act. And as you all know, all these 3 elements are already quite successful in TKH. And that is where we really would like to bring these together and now what is called automation. We are already quite successful. Alexander mentioned, for instance, the highly automated systems in the rubber and tire industry. But we are also quite successful now in moving up with our vision systems in bringing solutions to the market, to customers to help them based on, obviously, our strong global network of sales, but definitely because we understand, have a deep in-depth knowledge of the applications in the market.

Now if we combine this with what you see on the right side, with our smart software and AI capabilities, and the engineering skills that have been proven in machinery, highly automated machinery, you can really bring the next level of automation to the market and support customers getting to this autonomous level of production. Now to dive a little bit further into AI because a lot of companies are talking about artificial intelligence and bringing that to the market. I'm really convinced that in TKH, we have organized this in a very special and different way than other companies have. What we have set up is a group of software specialists. In total, we're talking about 130-plus engineers based here in Amsterdam and in Poland, who are deeply embedded as a team in -- you see that on the left side of the picture, deeply embedded in the universities and the academic world where work students and professors are doing either in the hub or with their research teams on the -- at the university, working on real-life applications and ideas.

And at the same time, this team is also deeply embedded in the outside world of the software community where open source, for instance, is created at lightning speed, and that makes that with combining this, they can do real fast development of AI-powered software and machine learning principles. And on the other hand, this team is also deeply embedded in the R&D departments of the TKH companies who have the in-depth knowledge and the direct market access to apply this? And in this way, we can bring at very high speeds, real help and support for customers in the market. Now to underline this statement, I would like to introduce you to Aleide Hoeijmakers, who is leading our applied AI team here in Amsterdam and they will start a short video.

[Presentation]

Our AI hub serves us to bring with our operating companies functioning as the nervous system. Together, for a responsive network that detects opportunities, process information and execute coordinated actions across our entire organization. Rather than each company developing their own AI solutions we built centralized expertise that benefits our entire organization. We developed proprietary algorithms once, then adept and deployed in a close diverse application. We take that research all the way through to practical implementations, ensuring our innovation create measurable value in real manufacturing. A perfect example is our proprietary machine vision algorithm, versatile across different applications, enforce quality inspection in one division by enabling intelligent predictive maintenance in another.

And she mentioned also another great example that we -- the algorithms that are developed for one can be easily then connected also to other applications. And that really helps in creating this very fast-to-market approach of smart software. Here, you see the overview of what we now see as automation in TKH, revenue of a little bit over EUR 1 billion when you look at the last 12 months up to now. On the left side, you see the division over the various activities. But I'm sure that Elling will dive a little bit deeper in the exact configurations, et cetera. You see that for the coming 2, 3 years, we predict an overall annual growth of, say, 5% to 7% as a bandwidth, where in the past, we have grown much faster. And that has to do with, like Alexander already explained, there's something going on in the industry right now with some reluctance. But nevertheless, we predict growth. already in the coming 2, 3 years. But after that, we are sure that we are very well positioned for future growth.

More detail on addressable markets, et cetera, will come from the next 2 presentations. And I will now introduce first Jeroen Slobbe, who is the COO of VMI who is in the -- previous known as Smart Manufacturing Group. Jeroen?

Thanks, Harm. My name is Jeroen Slobbe, COO, responsible in Tire Building for R&D, engineering and operations. I would like to start with the portion tire building represents in the smart manufacturing system because a lot of things has happened over the last 4, 5 years. You see a, I would say, spectacular growth in our year-on-year organic turnover growth of over 10%. And also, we were able, in this segment to recover on the return of sales levels up to the 19%, which we are anticipating in this pillar. On the right-hand upper side, you see, of course, that the tire building is more or less dominating this smart manufacturing system pillar. And that's also the reason why I was invited to share a little bit our outlook and view on the tire building part. And with that, I think it's good to start with a small video.

[Presentation]

So what are you actually looking at if you think about tire building. And I think the best representation you can see here on this slide, you look at the enormous passion our company has to create state-of-the-art technologies and constantly focus on creating value for our customers. You're looking at decades long of growth with multiple figures, and multiple digit figures. But what is also clear is that VMI or tire building in TKH found itself in a sweet spot where technology can really lift, let's say, a market. Initially started in 2009, introducing the MAXX technology picked up by the Tier 2s, later introduced the Hands Off Eyes Off philosophy around the MAXX automation, also picked up by the Tier 1s, supported and little bit affected, of course, by COVID outbreak in 2019. But clearly, we see a very strong bounce back after this period of COVID.

And yes, one of the reasons we would like to share our, let's say, growth perspective is that we believe that we can still maintain outperforming our markets. The focus of the customer, the focus on outperforming the market starts, of course, with a better understanding of the global tire industry, and I simply took some examples of how this current market looks like. On the left side, you see the global tire sales. And I took a period of 20 years, and then you see a gradual shift to a dominant or less dominant position for our Tier 1s. And the Tier 2 picked up, Tier 1s were overwhelmed by the quality of tires able to produce by Tier 2, and of course, that -- created a loss of market share for the Tier 1s.

You can also see that in the middle piece, it's a geographical distribution, multiple factors like transport cost, COVID, geopolitical pressure basically forced the Tier 1s to focus on local for local, a better spread of their geographical production capacity. Terms like near-shoring, factory closures is all related to what happened over the last couple of years to them. On the other hand, the Tier 2s still focusing on growth, still focusing on capacity increases. I will come back on that later a bit in more detail, but the Tier 2s are definitely still a strong part of our growth perspective now, but also in the future. It is recognized in our order intake already referred by Harm and Alexander. You can see it. 2021, domination by Tier 1s. 2024, you see now a dominant figure for the Tier 2 due to the slow order intake.

On the right side, there's something important for the whole presentation about TBM. If you look at the outsourced TBM market, we basically talk about the capital, people are willing to expand -- to spend every year on tire building machines. And on the right side, we basically try to recognize that the Tier 3s and the majority of the Tier 2s allocate all their outsourced TBM capacity already to VMI. On the Tier 1s, 50% of the CapEx is used for their in-house production and 50% is used for outsourcing TBM to predominantly VMI. Having said, if you look at the current market, including the lower order intake of the Tier 1s, we recognize a potential outsourced TBM market for EUR 600 million to EUR 800 million at this moment. We expect that in the next 5 years, this will grow with another EUR 200 million to EUR 300 million. So the biggest opportunity for VMI is that within this growing outsourced market, we will also grow our relative market growth. And that's what I tried to explain in the remaining part of this presentation. This results in extra TBM sales. This is basically how you should see it. And then I will try to explain some of those drivers.

It all starts with the market itself. If you look at the passenger tire market specifically, there's a 1.6 billion tires produced every year and, of course, driven by more tire sales due to either vehicle sales increasing or replacement market. This is not a very big growth, but it is at least a very resilient market. It comes back year-on-year. And it comes with extra capacity. But what is happening in that market is important for VMI because many companies are focusing more and more of their production to ultra-high-performance tires. And an ultra-high-performance tire can develop in all kind of directions. It could be the size of the tire, the composition of the tire, et cetera, et cetera. This ultra-high-performance tire result in the need for higher technology, higher capacity. So this whole product mix dynamic in our market is extremely important for VMI to be the preferred partner for outsourced capacity.

The second driver in this growing and developing market is what we consider what is happening to the Tier 1s right now. I just introduced that the geographical spread has improved fair, but at the same time, they still have to update their existing factory footprints. And for us, that outsourced potential, we expect them to invest in the future is, of course, our biggest challenge to further grow our position with them. The second part is, and you might follow this a little bit, but there are still many capacity increases announced by Tier 2 customers. Plans introduced in India in Morocco, Algeria, Middle of America and South of America. So we still -- on the backbone of these investments, we still believe that there is a growing potential for VMI to also grab that portion of the growing market. So there's quite a solid midterm growth perspective for VMI, especially and then also the Tier 1s pickup.

On the right side, probably important for you also to note that 1 out of the 3, 4 tires is made on TKH equipment. So there is some space still to go. On the other hand, another important driver is of this installed capacity, which is not linked to TKH, the age is more than 20 years. So 40% of the installed non-TKH capacity is aged -- is longer already or older than already 20 years or so. So massive potential for us to further grow. Another driver in this aim for and this ambition to outperform the market is driven by the growing tire complexity. And just to give you an example on the left side, multiple factors. It's electronic -- of the electric vehicles, of course, drives the new product characteristics, use of sustainable materials. The rim size has already shared and on the other hand, people are also -- customers are also developing all kind of tire specifications to be able to deal with all weathers or all kind of winter circumstances.

What is happening is that, if you look at how our customers need to deal with this changing and increasing product mix is that basically the amount of passenger tire articles is constantly increasing. And I took this number for one of the Tier 1s and they basically presented that they now have to deal with 12,000 individual passenger tire articles, and they still believe it will grow. Now the impact it has on supply chains. The impact it has on change over time. The impact it has on flexibility. This is for us an extremely important driver that helps us to convince our customers that with an advanced technology position, we might be able to grab that outsourced portion as well and the technology gap between what they are capable to do in-house and what VMI tire and TKH tire is capable to do is basically going to become wider and wider and therefore, more beneficial for TKH Tire.

And finally, our breed, the passion and the capabilities we have evolved over time is also changed into how can we create value for our customers? And how can we also create this value in higher revenue per tire building machine. And I took some examples of what happened in 2009 when we introduced the first MAXX technology, we were able to sell it on an average price of EUR 2 million. It grew gradually by introducing the hands of the technology of MAXX. Today, we sell these machines between EUR 2 or EUR 3 or EUR 4 million, depending on the amount of features we add, so we are basically able to convert our technology advanced position also in higher pricing. And we believe that this autonomous drive and alternative need for more autonomous machine is going to help us to put, let's say, these added features also in price increases to our customers.

To give you some examples on what we think autonomous production can be. I put some examples here. FOD is one for an object detection. How can we prevent of using raw materials in the tire in an early phase. Self-adjusted breaker service means basically without operator intervention, control the machine, helping to do autonomous production. And we believe that, that operator independency will help to understand, let's say, the complexity and deal with it in the future, also beneficial for VMI. So all in all, knowing that the market, the outsourced addressable market will grow in the next coming years. We believe that we are ideally positioned to grab that outsourced portion in a bigger percentage for TKH tire, driven by well positioned to anticipate these business drivers, knowing that the truck tire market currently is quite weak, but it will come back anyway. And we also believe that if the Tier 1s step up again, we are ideally positioned to help them to overcome this technology gap they might have with their own in-house production.

Another basket for future and further growth is what we call recurrent service business with an installed and growing installed base of our own TKH equipment, there is also a constant need to activate and keep, let's say, our existing installed base rejuvenated. And we have developed a complete portfolio of offering in that part, but we also invested already in our global footprint with service centers in, for instance, Mexico in preparation, Japan in preparation. And currently, we grow also our service center in a fast-growing market in India. So this combination of portfolio organization structure, but also our 24/7 call out services towards our customers is basically something we believe that we can further grow quite significantly year-on-year from a recurrent service business.

Then on UNIXX often explained also in updates to you. Where are we currently with UNIXX. Basically, the UNIXX technology merged to production stages in the tire building process. It's the component prep combined with tire building. It combines strip winding technology with the capability to build a tire. It is, in our opinion, the answer for the mega trend when it comes to reducing batch sizes, increase flexibility, but also keep control of the quality of the tire from the beginning up to the end. Where are we now with UNIXX as such? We are offering it, of course, as a sell, but we also are quite successful nowadays with what we call the derived technologies coming from this unique platform. And I wanted to share 2 examples of where we currently are.

We introduced the UNIXX Belt maker some years ago, which is currently quite successful in the market. And just to give you some impression is that it is -- it has shown how to optimize the manufacturing process. We see repeat orders coming from those customers who currently have installed the UNIXX belt maker. But one of the biggest advantages what we already claimed to our customers and is now also proven in the field, that it significantly reduced the amount of use of materials. Now that immediately fits nicely, let's say, this whole dynamic and development of technology advance and product mix development, et cetera. So UNIXX belt maker is what we consider the answer of all these trends in sustainability, high-performance tires, things, et cetera. I'm also happy to announce in this call that we use the UNIXX technology to enter a new market for VMI.

We, together with a launching customer, we will soon in the next years to come, introduce a UNIXX Moto alternative based on strip winding technology with tire building and completely enter into a fast-growing ultra-high-performance tire market for the motor cycle industry. And with this launching customer, we also believe that we have the nice entrance to this market potential. And with that, we believe the UNIXX platform is partly potentially here and there eating some of the MAXX TBM existing market but on top of that, we really believe that this merging of stages component and tire building is going to offer us in unique new entrants into a new addressable market. And finally, but not the last one is that in order to maintain that nice return on sales level, we have a quite aggressive and ambitious operations excellence program. It's basically spreading our capabilities among the globe with finding sometimes best cost alternatives. Sometimes simply trying to find the best way to allocate and source our materials.

So all in all, we also believe that there is a strong focus in our operations to excel and make our customers happy by always constantly deliver the best performance and the best quality and at the same time, of course, also give them access to the latest and best technologies. Having said, introduced already with the low order intake of the current market in the Tier 1, the very mild and a soft market in truck tire, we do believe that there is still possibilities to grow driven by this outsourced market, driven by this relative position, we still have to grow. We do believe that the updated product mix we have, the drivers behind, let's say, this -- in this market, will help us to give a growth with milder than expected, but we are definitely ready for future growth into the 2030 to come back to the traditional double figure CAGR we were used to over a very long period.

So with that, I would like to conclude. Thank you for your attention. And I would like to hand over to Mark Radford. Thank you.

All right. Hello, everyone. Good afternoon. I'm excited to talk to you a little bit about Smart Vision systems. So within Smart Vision systems, there's really sort of, again, focused on vision technologies. So Vision Technologies overall from the turnover accounts for about 90% of the segment. And of that 90%, there's roughly an equal split between machine vision as well as security vision technologies. Over the past 4 or so years, we've seen most of the acquisitions within the group fall within this space as we really look to focus on key technologies that we believe our enablers. We've definitely had some pressure in the overall market conditions that have come from semiconductor spikes and then declines. But overall, we've achieved overall organic turnover growth of 3.2% despite those challenging market conditions.

I do also want to highlight that the business is really a global one. About 50% of the turnover within the Vision segment comes from Europe. And the other 50% is roughly equally split between North America and the rest of the world. So I'm from the machine vision side. I'm going to spend most of today talking about machine vision, but I do want to just briefly update what's happening within the Security Vision space. So Security Vision. This is really a combination of pieces for mission-critical monitoring, mission-critical communication as well as parking guidance and intelligent traffic systems. TKH is really positioned at the high end of the segment with sort of high-value offerings, but is well positioned to grow, particularly when we look forward, there's a lot of geographic opportunity for the expansion of this group.

In addition, the current environment is one where there's really a lot of opportunities being driven by rising security awareness but also the need to combine automation with the vision technologies. And this is really where this intersection between the market needs for greater awareness, combined with the technology enablement through software, AI and other technologies are now creating increased automation possibilities within this space. So we're seeing automatic enforcement and monitoring, particularly in places like traffic monitoring, tolling, things like that, but also from a security perspective. Really having systems that are observing what's happening, making decisions and automatically making the next thing happen. So overall, when we look forward to the next 4 or 5 years, we're expecting a total addressable market to grow at just over 9%.

Now switching to machine vision. Again, I'm going to spend most of my time focused on machine vision today. I want to sort of highlight where this group is at in terms of the overall presence. So once again, really a global presence with a combination of manufacturing R&D sites across Europe and North America, but more importantly, a very strong direct presence in terms of sales in all of the major markets. A big aspect of the strength of this group is to be in the ability to connect with customers, those key customers have sort of a customer intimate relation with them and drive business from that perspective. So as we look across the world, you can see we're well positioned in all of those major markets.

In terms of our go-to-market strategy, we have a good mix of customer types. In particular, I want to highlight the OEMs and system integrators together accounting for about 50% of the business within Machine Vision. And what's really important to recognize is with these 2 customer types, their business is directly tied to our business. As they grow their business, our business grows. As opposed to end user business where you can go through a lot of cycles depending on the investment, user companies that are very focused on making sure that they're continuing to sell systems and finding new markets, so we will get great growth from that perspective.

In addition, we have a great distribution channel of partners accounting for about 39% of the business. And this is really there to serve either a combination of the smaller geographic markets or simply smaller customers or wouldn't be efficient for TKH to go direct to these customer profiles. So they fit that section of the overall engagement. And finally, looking at the verticals in which we serve. There's a good mix of activities but really with a strong focus on manufacturing and production systems. So from a categorization, general factory automation is by far the largest share, but you can see we've also got very strong presences in specific with markets such as automotive and battery, consumer electronics, wood processing, solar, et cetera.

So some of you might not be very familiar with exactly what Machine Vision is. So I'm going to try and talk a little bit about that just to introduce sort of my view on how to categorize the different ways in which Machine Vision is used. So first up, probably most traditionally, Machine Vision is often being associated with inspection in the factory. Look at an object, make a pass fail or a quality control decision, but also used for grading or sorting or other simple applications like that. More and more, we move into the automation bucket, the second column. Harm has talked a lot about this, but why is vision important in this section. Well, really Vision is there to help manage the complexity that can come when parts vary or conditions vary, replacements vary. And there needs to be some sort of closed-loop control in terms of the overall system. So Vision creates those eyes for the machines to do their jobs. In reality, that's expanding from simple machines now into robots, collaborative robots, vehicles, all types of sort of automated systems that exist in this environment.

The next category is in the area of optimization. We sort of think of this in terms of transformative manufacturing, taking one good and turning into another, taking a raw material, producing some sort of value for it. And here, Machine Vision is a key portion of that optimization process, really allowing the producer to make the best decisions automatically to optimize what value you can get out of an object. I'm from LMI, we started 40-something years ago in the lumber industry. How do you take a tree? And how do you cut it up into the most valuable lumbar? Because at the end of the day, that's what a sawmill cares about. But that applies to all different types of industries and particularly as we start getting into more of a focus on sustainability, monitoring yields, monitoring material usage and wastage. And these are key areas where, again, optimization can play a key role.

And then the final area is really digitalization and augmentation. And this is a bit of a catch all. But essentially, you can think of it in 2 ways. The one portion of it is digitizing the real word -- world, capturing data. So going out there and observing what's happening and creating records of it. But also creating tools that sort of augment humans abilities to perceive things. So how can we enhance human vision with machine vision. So this can be creating systems that look at things that would be far too small to see with the naked eye or shifting the spectrum, right, using hyperspectral imaging or infrared technologies, to see through fog or to see through the skin of a fruit to other things and allow humans to make decisions utilizing machine vision tools.

So now that we know what Machine Vision is, what's sort of driving the growth in this market overall? I think Harm has talked a lot about the automation sections. I'm not going to repeat that. But to briefly recap, a lot of the challenges with wage growth with labor shortages with deglobalization they're creating a very, very strong business case for automation. In some cases, this is just simply adding vision to optimize the machinery or a piece of equipment that's already there. And in some cases, it's driving new equipment purchases. We're also seeing a big shift in terms of how complex production is. Jeroen just talked about how many different types of tires vendors have to manage. But the same thing is happening in every industry, right? There's more variations in the colors of cars, the shapes of cars, the types of parts that have to be produced. And this is creating complexity for those factories to manage. They have to understand what's happening on the line, how to manage all the different parts, how to manage their supply chain, and they want to be able to do that automatically. So vision is an enabler there.

The second sort of category of growth comes from the governance perspective. Some of this is based on regulations or safety initiatives, where there's needs for traceability or other aspects. You can think about this sort of through the context of like lithium-ion batteries and making sure that it's understood what happens with batteries and how do you control them due to the potential risks associated with them. At the same time, there's a big focus on sustainability now, right? How do you gain, get higher value production out of the raw materials? How do you manage waste? How do you ensure that you've made or got close control on some of these systems. And then really, the final category is on the technology side. Here, you sort of see new developments that are creating a combination of conditions that allow for possibilities that weren't previously possible when it comes to machine vision and automation. Some of these come from Machine Vision itself, new developments and sensor technologies or cameras someone more of the software algorithmic AI side, where now those systems have greater capabilities, but they also come from adjacent technologies. Collaborative robots make automation possible environments where it would have been size or cost prohibitive in the past.

Wireless communication makes it easier to integrate these systems. Edge in cloud computing creates very scalable processing networks because they can scale up and down based on the needs of the system. So as you combine what's happening in vision with what's happening adjacent to vision, again, there's a possibility for basically new addressable markets that are being continually created. So when we take this all together, we're coming out of a bit of a soft period or even a downturn in machine vision. Overall, the market this year is still -- we've seen the sort of the first signs of rebound in growth. I think we reported on that in half year results. But we haven't necessarily seen that, that full turnaround that we expect to pick up. So overall, we're projecting about a 5.6% CAGR over the next few years here.

So we've talked about the market and how it's growing. Now I want to talk a little bit about what the building blocks are for TKH to tech to capitalize basically on that growth. So TKH has built up a very nice portfolio of machine vision technologies. Again I highlighted a number of the acquisitions from a revenue perspective, but I also want to sort of highlight them from a technology perspective, where we've been finding companies that have complementary technologies to strengthen and build out the overall portfolio. When we look at our characterization of the overall Machine Vision market, we estimated it's valued at about EUR 4.8 billion. And when we go through the different segments, right now, we're addressing about EUR 3.4 billion of that. But in particular, we have really strong market share in a couple of key sections: area scan or 2D cameras, 3D cameras, line scan cameras, vision software and frame grabbers, these are all areas where we're very active. And so when you put that all together, overall, we are a top 5 global player in the Machine Vision space. So really, this has created a strong base in technology that allows us to go out and expand into these new addressable segments.

So now I want to talk a little bit about what we've been working on internally and maybe isn't so visible outside, but creates again, another aspect of the growth. So there's been a big effort overall for about the past 3 years now on focusing on organizational consolidation. There's different aspects to this that I want to briefly touch on. The first of which is simply commercial, right? Bringing our teams together to cooperate and have a clear strategy on how we can reach the market in a more well-controlled way, right? So how do we increase cross-selling? How do we increase cross promotion but ultimately, how do we gain more from the sales organization and the partner networks that we have.

The next is really from an operations perspective. There's been a lot of combination of production sites and supply chains. This is really just important in terms of creating not just cost efficiencies, but also creating scalable efficiencies, creating more resilience in terms of the supply chain and ultimately having something that our customers can be confident in. And then finally, and probably again, this ties to the capital portion of it. There's been a big focus on R&D and how do we centrally coordinate our activities such that we can develop all of our products off common components or a centralized platform. So this has been now centrally planned and starting to be implemented now in the latest set of products that are coming out.

So on that note, I think a perfect example about this is talking about our software ecosystem. So at the core of this is a product we call GoPxL. And GoPxL is essentially the machine vision execution software for the industrial space. So starting at the bottom, we have all of the different hardware that exists in the TKH Group. We've now unified this connection interface such that all of this hardware can plug into the same platform. This platform manages the synchronization, the communication, external control, et cetera, with this. And it provides an engine basically for your software to run it. This is where the AI algorithms would come from our team at TKH AI and TKH technology plug into, right? It gives them a home for those algorithms to actually make decisions based on the data.

But then once you've made that decision, you have to do something with it. You have to communicate it out into the factory. You have to control a robot, talk to a PLC, archive data as well as provide interfaces to the operators so they can see what's been happening on the machine, how things are trending over time, if adjustments need to be made. So that all exists within one unified platform now. And this really, again, sort of sets us up for future growth.

Okay. So we've got our building blocks. Now let's talk a little bit about the addressable markets and where we're going. So the first thing I want to talk about in order to sort of set the stage for why the software ecosystem is so important is talking about the machine vision value chain as I see it. So starting on the left, we have components sort of the lowest level of what we would consider machine vision. And these components by themselves aren't necessarily useful. They must be combined with other components in order to get something that actually gets an image or creates your basic system. But there's a large portion of the overall Machine Vision market. When you take those components and you plug them together, you kind of reach the middle category. Now we have what we call vision systems. They're highly configurable systems based on a combination of lenses, cameras, lighting, software, that can be used by users and configured to solve a huge variety of applications.

And then finally, when you take that and you start making it more specific, when you add unique mechanics, but also specifically unique software, unique algorithms to the point where you get a turnkey vision system, this is sort of the highest layer in terms of the overall solution. So right now, TKH plays at all of these levels. And we have a unique advantage here where we can leverage the technology that gets to the layer beneath it to ultimately increase our value add, but also develop these solutions much faster and more efficiently. So with that, we're now taking our new software ecosystem, adding some new hardware and starting to go after the rest of those product segments. So coming back to the previous addressable product segments I talked about, we're now taking GoPxL. We have some new hardware coming out, and we're launching into the smart camera market. This, combined with the ability for GoPxL to essentially run on any device, whether it's an edge device, an accelerator or PC, allows us to create configurable vision systems.

So when we go back to the EUR 1.4 billion of the overall machine vision market that we weren't addressing before, we're now able to start getting into that market. It's a very big market. I'm not going to say we've got one product recovering the whole market, but we're making that step and we're going to keep refining and building into that overall. So we're coming in at the very top end with basically the highest performance smart camera that exists on the market right now. It will be able to run the most advanced AI networks and it's able to train those networks on the edge with the camera itself. There's no need to install software. There's no need for cloud computing. This is basically a very high-performance self-contained device. So again, I think this combined with the fact for GoPxL to easily scale between those different processing architectures is really an industry first. A different perspective on how we can take this technology platform and leverage it into solutions and new markets is what we're doing right now in the growth in security sections.

So a little bit different than the pure security vision but more from the -- what the component companies have been selling, they're now able to start transitioning and move into basically selling systems and solutions to partners in this space. And in these areas, there's some pretty strict requirements that these companies to have. Whether it's from simply the fact that they're looking for an entirely Western supply chain to the fact that they want a large amount of edge processing to happen on devices, they want ruggedization to happen. They want customization of these devices. So with our platform of components and software, we can now start building these customized solutions for partners in that space at a time when this industry is seeing great growth.

All right. Now for the last section here, I really want to tie it back into essentially the whole message around autonomous -- or sorry, autonomous production. So Harm talked about the yesterday, today, tomorrow message in terms of the transition from sort of the semi-automated systems into these fully automated systems. So from my perspective, where TKH is going from a vision perspective is as we move forward, we're going to focus our efforts essentially on the systems and the solution aspects to help create Machine Vision solutions that enable these fully autonomous solutions to happen. So a couple of examples of this.

TKH is right now active in selling 3D vision-guided robotics. So these are systems that are basically using 3D data to provide real-time feedback and control of robots, to handle variations in part size, part shape, part configuration and is addressing different applications in certain markets. Right now, most of the business is in the automotive space, but we're starting to expand out into other cases, automated palletization and depalletization for mixed case pallets. It was a great example of common technology but in a different industry or a different application. So overall, when we look at what we're doing in this space, this is really representing growth opportunities from a number of dimensions. We're growing in terms of the value chain. We're moving up to the solution level. We're growing into new markets, warehousing, logistics, distribution, where we haven't done it. But we also have huge opportunities to grow from a geographic perspective. Right now, the majority of our business in the space is in North America, and we're now starting to leverage the broader TKH Vision commercial network to expand solutions onto the other continents.

The next sort of industry I want to highlight is automated welding. And you might say automated welding is not new. And that's true. There's a lot of robots that weld parts right now, but those systems essentially require for the parts to be essentially the same all the time and positioned in exactly the same spot. So that works in a number of industries. But in the rest of the spaces, there's simply no solution for this. Parts are still welded by hand or even if they are welded by a machine, they have to be manually inspected by an operator and then manually reworked when there are defects.

So in a short term, what we're going to see is we're going to see a big push towards more configurable, more flexible systems to handle higher variation in the parts that weld. We have all of the key vision blocks basically to enable this from a pre-weld perspective, as well as investing in other developments to start handling weld monitoring. And then, of course, we're already doing inspection from a post-weld aspect. But also to think about this from a future growth perspective. This is also where inspection starts to meet automation. What happens when you inspect the weld and you find a defect? Ideally, you want to be able to take the same system automatically program or rework path and then have the robot perform that rework, so at the end of the day, a good part comes off the line rather than a tagged defective part. That's really the future for where we see machine vision going.

So wrapping it all up, looking at our Smart Vision outlook, we again sort of see these 3 different dimensions to our growth moving forward. On the one hand, we're going to see the market grow. So a combination of automation, technology developments. Again, this is just where there's going to be this sort of underlying growth. From our consolidated positioning, we see more opportunities to develop both new products, but also just a better more combined sales approach. And then finally, from the addressable markets, as we push more and more into solutions, this will sort of provide the last portion of our growth as solutions become a more and more important part of our business. So when we put this all together, essentially for the next 3 years, we're projecting that we're going to be above the 5% to 7% bandwidth, essentially offsetting the slightly lower projection from the smart manufacturing side of things. Thank you very much for your time.

We're at the break portion of the program. So please get up and I think we have some refreshments outside. Thank you, everyone.

[Break]

Good afternoon, all of you. Very nice welcome from my side as well. You can see on my screen, my job within the TKH organization, Managing Director for the Offshore wind industry since 6 years already. And before that, I do have a history as CFO for 17 years. After, you have energized a little bit during lunch, let's talk about electrification which is a very, let's say, main part of the smart connectivity within the TKH Group. There's a very simple, let's say, slide on what is smart connectivity as we speak. So the turnover over the last 12 months in this situation, July '24 until June '25, compared to 2021, you see an average organic annual growth just about 3%. And what is important in this is the bottom right figure where you see that also as today, the electrification portfolio of TKH is, let's say, responsible for 69% of the overall smart connectivity. And after that, you will see that this is a huge increase compared to 2021 when you look at the market share.

So the global trend in electrification is clearly visualized in this figure as well. 69% of the overall pie. And top, you see, which is, I think, familiar to you that the core market still is Europe, of course, including the Netherlands, which accounts for almost 90% of the overall business. Electrification is part of smart connectivity. The return on sales, of course, we have to push that 9.3% 2021 and 2.1% over the last 12 months for smart connectivity altogether. 69% as part of the pie, let's say, as I just mentioned, which was 46% and in 2021. So if you do a deep dive into electrification as part of the portfolio, you see that the annual average organic growth of the electrification portfolio was just about 10%, driven by, let's say, the macro trend of electrification itself. We need to be sustainable for the society and take care of the next generation, 10.2% growth over the last 4 years annually.

Let's go to the video for electrification to warm up you a little bit. And after that, we dive into offshore and onshore.

[Presentation]

The energy transition goes on. And so does the electrification, of course. This afternoon, we're going to touch upon, let's say, the 2 areas where TKH is active when it comes to energy transition. It is the offshore wind industry. So let's say, the power generation, mainly linked, of course, to our capabilities in Eemshaven. And we also touched briefly upon, let's say, the developments when it comes to the high-voltage market, say the transmission market, think about TSOs like TenneT. And we'll also give a little bit of a glance on the medium voltage developments, where TKH, we can say that already has a very well-established situation already over decades being by far the market leader in the Netherlands.

If we talk about, let's say, the global drivers or at least the European drivers, I must say, towards the cable industry, what is the biggest growth potential electrification full stop. There may be a little bit of concern in the market over the last couple of months. But still, if you talk about top left, Europe clearly committed to 42.5% renewable energy by 2030 already. And by far, the biggest part of that comes out of offshore wind industry, it's way more than 50%. This has been confirmed in 2024 and 2025. So it's not only that these targets have been, let's say, diminished, they are still in place. This is driven by the fact that we need to electrify the organization and the society, so to say. And this means that by 2050 -- by 2050, the electricity demand will be twice as much as we have it today. And this means electrifying the industry, electrifying, let's say, the power consumption of households as well.

And of course, a big driver, the net zero that we need to achieve to take care of this, let's say, global altogether. And then it's, I would say, huge amounts, if you talk about, let's say, the increasing investment that is needed, the CapEx until 2050, EUR 100 billion annually, EUR 100 billion annually to match, let's say, the challenges we have and to get that overall power grid on the -- let's say, the right level to achieve those targets. Europe only. How did TKH already prepare itself to play a major role in this electrification. A CapEx of EUR 150 million was executed over the last few years. And of course, it goes without saying that a big trunk of that is linked to the new facility in Eemshaven, which is linked to the offshore wind industry for the biggest part. But do not forget that also the factory in Lochem was completely transformed into a specialized factory capable to meet the high voltage challenges as well up to 200 KV, it's maybe a technical thing, but we are prepared for the high-voltage markets with having transformed the factory in Lochem as well.

And also, in Haaksbergen, we had, let's say, quite some facilities which were linked to the telecom market. Those facilities have been transformed into production capabilities and capacity to meet the challenges in the energy world. So all 3 factories play a major role in this CapEx program. Before we start, let's say, on the offshore wind industry, I would like to share a video on, let's say, the latest developments in Eemshaven. Alexander touched upon it already. I'm also responsible for business development, but I don't have a technical background. But I can assure you there are operations directors who are in this video, our technical director who are daily taking care of improving that process day by day by day by day, and the progress is huge over the last couple of weeks, months. Can we start the video?

[Presentation]

Well, they are not here in the audience, but thank you to Will Ho and Ijmo, I would say, the technical heart of the factory in Eemshaven. And every time I'm there, so Jeroen touching his heart when he was talking about VMI. This is really touching my heart, working on sustainability with such a marvelous factory. And I've seen a lot of factories all of Europe, but not such as this one. When we come to talk about offshore energy, so let's say, the first block. We are active, what you see in the graph over here at the left side. So the cable we are producing is connecting all the individual world, let's say, turbines and in the end, transporting the energy to the offshore substation. And then you go into the export part, which is the red truck in this picture, that is not our cup of tea. That's the business of Prysmian, NKT and Nexans, a very competitive market, whereas the array cable market is really, really a niche market, also looking at the volume it takes from an overall investment in an offshore wind farm, come to that a little bit later on.

So we are active in the yellow part on the left side. And being active means not only cable, by the way, a lot of accessories and promoting ourselves more and more as a solution provider also responsible for termination and testing of this cable on the turbines itself. Now looking at, let's say, offshore wind. I'm not going to mention all the individual bullets. You see, of course, in your handout. But what is clear, which is a bit contrary to maybe what is the sentiment in the market, but the demand in array cable because that is how we calculated this 2030, I do have the graph hindsight, 2030 compared to 2040 -- 2024, sorry, will double 6x. So by 2030, the demand in the offshore wind industry is 6 months -- 6x as big as it was 6 years ago, visualized by clear tenders, which are known in the market already, and if you then make an analyze on what is, let's say, the target per individual country, you also have the European uplift, which we will see in a picture later on.

What are the biggest customer challenges? The biggest customer challenge is that the demand and the supply, the supply capacity does not meet, let's say, the overall demand that is necessary. You see it in the graph as well. And that comes along with the fact that some players have decided to go into, let's say, huge export, let's say, transitions. So the overall capacity, which is available for the array cable market is becoming lighter and lighter, yes? So that's a challenge of, let's say, the industry and very, very harsh targets on sustainability, which we meet with our design.

If you talk about the market position from TKH in the offshore wind industry, it's clear that we do have already a very fast market share. This is the 30%, which was applicable over the last 4 years. But if you look at our hit rate over the last year, it was 80%, talking about Europe, to be clear. So all the tenders we participated in, we had a very, very high hit rate in Europe. What is distinguishing us talking about the market position, let's say, from our competitors? And now we really come to talk about the unique, let's say, point from TKH that is the design of our cable, which meets the sustainability challenges, but which also meets, let's say, the challenges which there are from a mechanical and electrical point of view. There is no such design in the market available like ours. And that brings us, let's say, also to the clear remark that some of you may think that winning such a framework from Vattenfall, a very reliable partner from us in Europe that we win those tenders only based on price or on whatever, no.

The framework agreement with Vattenfall was granted mostly because of the sustainability performance of our cable and the enormous technical, let's say, capabilities as well. This is what is key in this market. It's just like Jeroen mentioned on VMI, it's really a technology-driven market as well. And this is this typical unique design. I'm not going to touch upon all of it, but this one, this is the cable that we do produce. Ijmo mentioned it briefly in his presentation. This is a completely dry design. So we have no water ingress at all in the cable. And looking at the construction of the cable, it is absolutely compact and robust which meets the harsh challenges under which conditions this cable needs to be installed in the seabed. If you talk about legislation, in the current project offshore wind in Europe, you need to give, let's say, a design lifetime declaration of 35 years at least, which is, of course, good for the net present value of such a wind farm and good for the investors as well.

This is what we can approve, whereas other, let's say cable designs from competitors. Currently, really, really do have hard challenges to meet those 35 years design lifetime, well, let's say, wishes from our employees and the investors. Talking about, I just touched upon it already briefly, the market demand versus the supply which is available. This is a graph which was presented also last year. These are all known projects excluding China, worldwide, this one is worldwide, where you can see the volume of array cable which is needed to get the offshore wind farms being planned to be produced in those years, there is a mismatch. You see the dotted line. The dotted line is expressing the current and the expected capability and capacity of array cable production. And looking at, let's say, especially the graphs from '27 up till 2030, yes, you see that this does not fit. And that means that could not lead to a delay in our turnover, but lead to a delay in reaching the targets of 42.5% renewable power in Europe by 2030.

The dark blue one is the Europe uplift. So those are projects which are not yet really developed and also not known into databases like 4C Offshore, but these are linked to the challenges per country in Europe, and that is how you can, let's say, make this calculation. I want to touch upon, let's say, the first bullet right. The rest you can read, of course, we need the industry. We need to take off of the energy of the industry because we can produce a lot of energy, but if the takeoff is not there, we don't have a feasible business case. But we also need the politicians. And you see there that contracts for differences being implemented in all over Europe. It started in the U.K. contracts for differences and it's now on the table of the politicians in Sweden, Denmark, Germany and the Netherlands as well, which you recently have heard from, let's say, the still current Minister of Energy and Green growth.

This means that there is, let's say, a lot of comfort for the investors and the employers because contract for difference means that you will never reach a level of energy prices, which goes below a certain extent. So you can really calculate the business case on a secured price for the energy, but it also means that the uplift is, let's say, fenced off as well. But you can imagine that not being, let's say, dependent on the variable prices in the energy world, and all of you have read maybe that sometimes energy prices are even negative, that's out. So if we reach and if the politicians help us to get this in, I'm sure this will leave a lot of confidence for investors and employees to support the business.

Now what you see over here, this is Europe. By the way, just to mention, including the U.K. So this is Europe. This is also the picture which was presented last year, but now we extended it a little bit. You see the lime green in this one, that is the current number and volume of wind farms known already with, let's say, employees like Vattenfall like RWE, Total, you can mention Iberdrola want to invest over the next few years. It's a lime green one. You see the gray one, that's the same figure last year. And I'm not going to mention them all, let's say, 6. But you see clearly there is a shift, and that is, let's say, known by you, I guess, some projects have been shifted to the right. So they were originally planned for '26, but now they have been planned for 2027. And even just to only mention one, we have that framework agreement Vattenfall, the [indiscernible] project, 2 gigawatt huge. 1 gigawatt will be invested next year, so that's going to be produced by us, and the other 1 gigawatt will be transformed to 2030. No problem for us looking at, let's say, the rest of the order book that we have. But the second, let's say, trunk of the 1 gigawatt is now in 2030.

So what I expect is if you look at, let's say, those graphs from '27, '28, it could be that maybe something shifts from '27 to '28, '28 to '29. So it will be leveraged more. But still, the demand will increase up to volumes. You see that at the top left here -- top right, sorry, 19,000 kilometers already now known in the tenders in Europe excluding further potential, the EU uplift, which I mentioned in my previous graph of almost 6,000 kilometers that's not implemented in this one to be a little bit conservative. So far, let's say, talking about the offshore wind industry and mainly the array cable markets where we are in, but TKH has a long established position in the onshore energy as well as all of you know. And today, we will touch upon, let's say, the high-voltage cables and the medium voltage cables.

And just to give a little bit of glance already in the medium-voltage cables, I mentioned it already. There is a very long established position in the market in the Netherlands since decades. But the high-voltage markets, we will see that later on if we are really keen there and look at the niche markets. So not at the big volumes, but there's a lot of price competition. But really at the niche markets, this could be a nice growth potential for the electrification portfolio of TKH as well. Talking about medium voltage, just to cut it short, if you see the first bullet talking about market growth, this all has to do with the fact, and you read the newspapers as well, there is a huge congestion in the Dutch, let's say energy, let's say, infrastructure.

We cannot get, let's say, the industry connected to the grid. I have a slide on that as well. So only in the Netherlands, if we want to meet those challenges, a CapEx of EUR 195 million is needed to give our industry the opportunity to really electrify and get rid of fossil fuel, EUR 195 billion. Now what are the challenges of, let's say, the customers? It is that we need to speed up the installation capacity as well for those who are responsible for digging that cable installing that cable. That is one of the biggest, let's say, challenges we have. And we have the ongoing discussion, of course, on nitrogen and all the licenses, which, therefore, cannot be granted to get, let's say, yes, such a project started and digged. Talking about the market position, I already mentioned that you see it also in the header very, let's say, strong proven fundament in this business area already for decades. And we want to, let's say, pay off that in the next, let's say, 10 years. Looking at the huge amount of CapEx to be invested.

If you go to the next slide, I touched upon it briefly. You see on the bottom of the sheet currently, as we speak, more than 10,000 Dutch businesses are waiting to get connected to the grid or to get more capacity from the grid. That means they are being limited in their investment programs, in their growth programs. But it's also, let's say, a fact that due to this the electrification is under pressure. So the pressure on, let's say, companies like Alliander and Enexis is huge to get this done. And there is one thing I would like to mention on the left part, which is talking about the Netherlands, Alexander mentioned it already, there is a huge demand. Over the last, let's say, 1, 2, maybe 3 years, we have seen that all those companies, the DSO, so to say, increase their stock levels. So there was a huge demand, but it was already backed up by huge stock levels of these companies, that's done.

So the demand they have right now, talking about EUR 195 million to be invested will bring us to the fact that, let's say, we really need to start producing to, let's say, catch up with those demands. Stocking and unstocking, that's done. Now what you see at the right is, in the past, let's say, the medium voltage market was mainly linked to the Netherlands. You can say almost completely linked to the Netherlands. But abroad, you can see it here in the U.K., in Germany, Scandinavia, partly they have the same challenge. They have exactly the same challenge, and there is net congestion as well. And having Vattenfall on board is one of our esteemed customers on the offshore wind industry. Vattenfall was also responsible for the high-voltage network in Sweden for 40% and has a huge demand in medium voltage as well. And it goes without saying that we are talking to those as well. We have been invited to see whether we can help them as well.

So slightly medium voltage, we will try to get, let's say, a position very, very niche and not, let's say, all over Europe, that's not a possibility, but to get it being to an international market as well. When we come to talk about high voltage, think about TenneT, the figures even become more dazzling, I would say. If you look at the high-voltage market, and the expected, let's say, CapEx to be invested until 2030 in Europe, it sums up to EUR 500 billion. That is not the overall addressable market of TKH, of course, but it again underlines the huge amount of money which is the need -- yes, is addressed to this market. Looking at the customer challenges, more or less the same as we have in the medium voltage, lack of installation capacity as we speak. So that's -- and also here the political, let's say, stability is necessary. But you must say that also here, challenges are there, but the market itself will keep on, let's say, increasing to those kind of levels. A little bit different from our position in the medium voltage, where we have Dutch -- a clear Dutch footprint. We here will aim for a much more European footprint.

And what you see over here that the big players in the high-voltage markets, competitors of ours are focusing on the huge projects, the longer distances and really high-voltage cables, the extra high voltage mentioned in this presentation. But there is a secondary market, which is not that big, but where there is much less, let's say, pricing pressure and there is a need for a total solution up to 200, 222 kV and that is being developed by TKH over the last couple of years. I mentioned this one already. There's a clear position, let's say, in the Netherlands. We will remain that position, reinforce it even. But we want to focus, let's say, a bit more on the international market as well for the medium voltage but also for the high-voltage markets. That gives us a geographical spread as well. And I would say this is really a big fundamental to, well, accelerate the turnover in the electrification portfolio.

My last slide, if you look at, let's say, innovations, it is a technology-driven market. You see 5 blocks, not touch upon all, but this is covering as well the higher voltage developments. It is covering the medium voltage and you say, well, medium voltage well, it's a well-established market, traditional product. But here, we are aiming for smart installation processes as well, pre-connectorized so we can do a much more efficient installation in that respect as well. On the right side, the 132 kV and the floating wind, those are completely linked to the offshore world. Currently, we are in the world of 66 kV that will increase to 132 kV because of the bigger turbines. And the next stage, still a lot of challenges to overcome will be floating wind. So not a bottom fixed, let's say, turbine industry, but really a floating rigged moored by systems onto the seabed. But there it is, well, a matter of harbor capacity, mooring systems, floating systems to be developed and a sustainable part in the middle that's, of course, applicable for the full picture when it comes to electrification, not to be underestimated.

If you then look at, let's say, where we were in the last 12 months in terms of turnover in the electrification portfolio, and you look at, let's say, the expectations in the market when it comes to offshore wind high voltage, medium voltage, an annual average organic growth of 7% to 9% can be expected.

This was the last slide of my presentation. Thank you very much.

Thank you, Walter. Good afternoon, everyone. I see already some smiling faces, looking forward to this section and some of the analysts at least. I have to apologize from the beginning because I don't have any film. I don't know that's maybe a disclaimer to this, but I don't think it changes the message. If you look at, and let me just go to the first sheet. If you look at our last Capital Markets Day and some of the targets which we highlighted at those days towards '25, basically, when I look at the revenue level, you can see here how the growth of revenue was forecasted to be with a basket of EUR 100 million to EUR 150 million revenue to be acquired, a basket for divestments, EUR 150 million to EUR 250 million. And then, of course, a big chunk of organic growth.

We didn't succeed in the entire match of these 3 baskets. The divestments, yes, we basically got well into the middle of the basket. [ David Trone ] is not yet in here, but that has already been communicated. So that has been executed well. Some of the acquisitions which we plan to do, we have not done. We have shifted some of the required funds into the strategic investment program, which we have been running for the last few years. But we didn't see the full benefit coming through when we talk about the organic growth, not from this strategic investment program, at least not in the time, which we estimated it to be but also not fully from the innovations which we have carried in the last few years, and I'll come back to that a little later.

What went very well, I think, is the further traction on the, what we call the added value, the gross margin. On the back of the change of the portfolio, we have been able to increase our added value to over 50% for the entire group. Of course, there is a split between the added value in automation and the added value you can see in electrification, also that I'll come back with. The next chapter going forward now is, of course, capitalized and execute. The foremost and first, I would like to address the ESG agenda and sustainability, a key topic within the organization, not just because this is a kind of markets issue, but also we want to take our role in the society and getting a right portfolio into the marketplace. We find it very important that at least 70% of our revenue streams are coming from portfolio, which hits the strategic development goals of the United Nations. And for the last couple of years, we have been reaching this target. Obviously, with all our efforts in the renewable energy markets, clearly, this has a clear fit to this particular target.

In the meantime, we have also upgraded some of the KPIs on which we report, and I refer basically to our annual report. There's a huge section about sustainability with all kinds of KPIs and targets and our actions related to this. But also here, there are some items mentioned specifically, like we now have also committed ourselves to a net zero carbon by 2050. It's a new element and some other KPIs have improved as well. Essential for us and a lot of innovations and developments, technological improvements are linked to the topic of sustainability.

But then diving further into the 2 segments, automation. I think by now, you have becoming familiar with this terminology. When we talk about the capitalize part, the element of how we go from here, on the automation part, you have seen already quite a few sheets referring with the growth opportunities, which are ahead of us. But if you look at this chart, your first impression might be that the best is behind us because the growth rate going forward is lower than what we have. That's not the case. It's probably more the time of 2028, where we look at which gets us to this particular parameter. If you look at the automation part, basically 2 segments: Vision and the automated machinery, mostly the tire building machines, of course, 2 different CAGRs, 2 different growth rates as you have been explained by the speakers earlier this afternoon. Vision above the bandwidth and the automated machinery below.

But that's especially the second part is a temporary issue. We have seen and we have been discussing already the activities for 2025. We have seen already a delta, a negative delta compared to a peak year '24 for the tire building activities. And that effect is also to be seen into the next couple of quarters. So if you look at the 3-year horizon towards '28, we definitely have in the initial period of that, still some headwind in our CAGR rate. But of course, towards the second part of this 3-year period, it's going to improve, and it will be back to the prior levels. I think what we have seen in the last 25 years with a CAGR of just over 10% going forward. I don't think the industry has changed. The dynamics which have been explained confirm our position with a further growth in the addressable market up to EUR 1 billion for outsourced opportunities. So from that point of view, towards the 2030 horizon, I think we are back to a substantially higher CAGR for that particular segment.

On the other side, vision is already at the level, as Mark explained, above the CAGR mentioned here. So from that point of view, I think we -- when we talk about midterm or a little bit longer term, there's quite some difference if you look at the opportunities here. And we have the portfolio for that, that might also be obvious. With the innovations of the last couple of years, we have a perfect fit to the market trends which we see and which have been explained so far. This leads also then to a return on sales, so the EBITA on revenue, which looks to be a little bit shy if you compare with the last couple of years. We are in the basket of 17% to 19%, but that's on the back of the development, as I just said, with the split between the 2 different segments.

We see, in general, a higher gross margin within the vision systems, than within the tire business. But still, with all the dynamics attached to the top line growth, we see a kind of stability on the return on sales for the next to 3 years. There is, of course, and you can see that on the right side, but I'm trying to repeat some of the prior speakers, quite a lot of elements in here, which have positive effects on further improvement. And again, here, I think if you look longer term, definitely, the upside is here to be above the [ 20% ] level, but that's beyond the time zone as we communicated here.

On the electrification part, and here, we are talking -- and you can see from the revenue figures about -- and I'll get to that in more detail when we talk about electrification, the segment that we have excluded from this chart, they all ready to be divested elements like the digitalization part. So we're talking here more what we in the past and it's not exactly one-on-one, but more the energy-related market. And then, of course, the growth rate is still substantial. Also in the last couple of years, the growth rate has been fairly high with a 10% growth on average. Also on the back of the investments which we have done, which, of course, have generated further growth, but not to the extent that we are fully capable to do and that is then for the further period. But it's more than 7% CAGR on top line, I think is here important to mention as well.

This chart looks maybe a little strange. But of course, we had quite a lot of discussions with quite a few of you. If you look at the return on sales for this scope, it has been quite reasonable double digits for quite a number of years. But of course, as I mentioned earlier, the strategic investment program has kicked in. We had to deal with on one side, start-up and ramp-up effects. And at the same time, we see that there is -- as you have been shown in the video. Good progress in getting back on its feet. And from that point of view, the delta going forward is substantial. So we predict here that this return on sales level for this segment is in the range of the 12% to 15%. Essential here is the capacity utilization. You might recall that in the first half of this year, we meet the specification of our clients, which we can produce. So the technical capabilities are all there, but it had quite some effect on the resources we had to use in order to get that executed. And that, of course, put pressure on the return on sales despite the fact that the segment has been growing quite nicely.

Other elements on the execution side, more general for TKH. You have a few baskets here. Of course, the first one, Alexander addressed already the separation of electrification. I'll concentrate a little bit more on the second, third and the fourth one. If you look at our divestments, we have done in the last about 5 to close 6 years, roughly EUR 450 million of revenue, which has been divested. And you can see that here, there is on the top part of the sheet. And most of the activities were in the previous connectivity segment. More commoditized portfolio, commodity where -- portfolio where we didn't have a lot of competitive advantage in terms of technology, and also the growth opportunities, creating value going forward, we're simply not there.

And in the more recent period, as you can see in the last 2 years, also some entities within the manufacturing segment have been added in the divestments. The acquisitions on the other side, relatively small and mostly, basically all of them in the Vision segment. And we plan, of course, the divestments to go further up to the level of about EUR 250 million. I will explain you a little bit later where they are located. The next element is, of course, the focus on cash generation, essential. Alexander also highlighted this, if I focus on cash, free cash flow, et cetera. What you can see here on this chart is, first of all, we have completed the strategic investment program. And we are not planning and initiating any further programs of this magnitude. So from that point of view, the CapEx levels are going to be normalized. And I would rather say one step further, CapEx is going to be reduced.

So what you see here is 2 baskets on one side. On the left, we have the CapEx related to R&D. Roughly 90% of R&D CapEx is within automation. And on the right side, you see the books related to the plant property and equipment CapEx. And there, roughly 90% is in electrification. So you see 2 complete different CapEx, let's say, groups here, each having their own dynamics. And if you look at our target here on the R&D side, we roughly spent annually in the last 2, 3 years, close to EUR 80 million in expense on R&D. Roughly half of that is capitalized. And if you look at our ratio of the capitalized R&D compared with the amortization, which of R&D, which you find back in our P&L, we want to close the gap. So in other words, put it simple. The line here, which says 1.4 has to go to 1, and it roughly works out that in the next 3 years, the CapEx on R&D through the efficiency programs and all the other things are going to be reduced by close to 30%.

That is not meaning that our innovative power is reduced. I think we are on the back of some of the initiatives presented by Mark and the vision group, we can be much more efficient with our R&D. And at the same time, looking back at the prior periods, in some cases, we have had too many investments in R&D or innovations at the same time, and they did not always materialize to the effects which we intended. So the hurdle rate for CapEx spending is going to go up in order to have a better, let's say, benefit coming out of the expense we have.

So when you talk about allocation issues, one is we're in the baskets. There are some change, but also at the basket as a whole. And the same applies a little bit on the right side with the plant property and equipment. There also, we want to bring the overall CapEx in line with depreciation level. And that also means that there the 1.2 ratio has to go down to about 1. So overall CapEx, when you talk about towards the '28 range is going to be below 100%, that's for sure. And if you want to talk about the split where CapEx is deployed, roughly, I would say, 60% is within automation, driven by the IP R&D related elements and the remainder is within the electrification part. Then if you look at the other elements in relation to cash flow is, of course, the working capital. Working capital for the entire group is too high. We have always had a target of 12% to 15%, and we are not changing the target. The target is realistic, I think, for the entire group. But here also, we need to look at the 2 different segments.

On the left, when you look at the working capital for automation, in '24, we used as a reference point here. We were at the range of about 12%. That is a good level, I think. If you look at the way how this works and why we are able to get to the 12%, despite the fact that in the 2 prior years, we had a substantially higher working capital in this particular segment. It had a lot to do with the supply chain issues, electronic components were hardly available. So our vision systems were greatly affected by not having availability in the supply chain that led to further stocking. And as a result, we carried quite some inventory into '23 and then in the beginning of '24. That is gradually disappearing. And on the other part, within this segment, of course, we have the business model of our tire building machines, where we have progress payments, advanced payments and all these kind of things, and that helps the working capital structure.

The model on the electrification. Also there, of course, with especially the subsea projects also works with advanced payments and progress payments and all these kind of things. But there, we have not come to the full functioning of the model that you can see here as well, but also not to be neglected here is, of course, the impact of digitalization especially the fiber optic business. We have had quite some issues in the market there, a structural overcapacity. We have been trying to deal with it with reducing our cost of the footprint which we had, which, in the end, led to establishing a new factory in Poland a few years ago, bringing capacity out of China to that facility. And also in the first half of this year, closing the activities from the Netherlands and bringing everything to that location as well.

Of course, if you are transitioning equipment, et cetera, to new locations, you need to build up stock in order to have a service rate to your customers. And that's all part of here. So the stock levels, working capital and digitalization has pushed up in the last 2, 3 years, also the working capital in electrification. These things should be normalized, of course, when the divestments of the noncore assets is going to take place.

The last element of this whole cash flow element is related, of course, to the capital allocation. Also here, we highlighted already the 4 buckets, if I want to call it and the kind of order which we try to bring in here. First of all, we want to make sure that our CapEx is something we have available in order to deploy. But within the conditions I just highlighted. So at a lower level than that we had in the past, no major substantial material programs. So from that point of view, this basket is already reduced compared to the last couple of years.

The build and buy, of course, we want to strengthen our position in automation organically, but also inorganically, bolt-on acquisitions, nothing in the sense of huge transformational M&A, but definitely also here, we want to use the opportunity in the market and our technologies, which we have by strengthening them to the bolt-on acquisitions. Already mentioned by Alexander, the dividend policy payout, which we have currently of 40% to 70% assisted by a kind of ambition, if you want to call it, it's mentioned here as an aim, to be at a 3% yield. And then, of course, remaining is then in the end, of course, the share buyback with a foot note there and an important one that we want to keep our leverage below 2. But by the fact that if you look at our divestment program as well as the separation of electrification, we will run through these baskets. And as I mentioned, CapEx programs are going to be lower in size. The acquisitions are going to be more of the bolt-on character.

And then, of course, with the definition on how the dividend will be distributed, you can assume that some important part will also end up in the last bucket. I'm not going to give more detail at this point in time. There's still a lot of work ahead of us to get to these proceeds, but this is the kind of mechanism we would like to apply. Then the last target, which we also have been guiding on already for many years is the return on capital employed. You also see here the 2 different dynamics. And of course, ultimately, when the remaining part is the automation segment, then here, the return on capital employed is between the 25% and 30%.

The capital employed, which is in the chart, has been gradually increased, and that's on the back of also some smaller acquisitions, but also a little bit on the capitalization of some of the R&D. But also there, I repeat myself, we are much more strict going forward. On the electrification part, the capital employed, of course, has to do with the strategic investment program, where much more capital has been deployed. There, on the back of a still difficult performance in the last 12 months, you can see that the return on capital employed is not looking good at all. But also if you match the outlook which we have, the return on sales coming back in the time frame highlighted, also here, the return on capital employed can go towards the 20% range, more or less.

I'll try to help you a little bit with getting your models organized on how everything now fits in one basket to the other. In this chart, on the left side, what we call the old system, you see the 3 segments, Smart Vision, Smart Manufacturing and Smart Connectivity. That has been our reporting so far. And mind you, by the way, in 2018, '19, we had 7 vertical markets. We went to 3. We're going to 2 with ultimately 1 remaining. So when you talk about simplification, I think this is a clear path on which we are. But I understand that it's difficult to follow this. But here, we want to make sure that you get this right.

So from the old segmentation to the new one, basically, Smart Vision and Smart Manufacturing end up in automation. And there, we have 3 segments: vision, automated machinery. Basically, it's the tire machines as the largest part of it. And then we have the category Other. The ball with the percentage is the share of total revenue in TKH based on the revenue of the first half '25. And the last column on the right, what we call future, says basically what will happen with the respective segments. So within automation, ultimately, vision and automated machinery will be the remaining entity as being what we call automation. The segment Other is categorized as noncore, and that is part of the divestment program. Same applies for -- within electrification, digitalization already at the beginning of the year, earmarked as to be divested being noncore.

And we have some additional noncore within that segment, which also falls in this basket. So the noncore titles amount to the EUR 250 million, which we earmarked earlier as to be divested. And then, of course, the electrification part is the one which will be within the separation agenda. I see a lot of people writing now, but also, and just to show it, not to go into detail with this, we will keep you, of course, informed about the underlying dynamics so that you can follow in your models what comes from where and you can keep abreast of the various subsegments on how they are doing in terms of their revenue and the organic growth related to that.

This is more for background information, but we'll make sure that you have the right information to make your analysis. And this is just as a kind of overview on how this would look like if you look at '24 and the first half of this year. My last sheet has to do with the summarized targets. And I think we have been repeating them now a few times. So I think you know them by heart, at least I hope. With automation, of course, having then the 5% to 7% organic growth target up to -- as a CAGR for '28, the EBITDA margin of 17% to 19% and the return on capital employed of 25% to 30%.

On the electrification, 7% CAGR on top line, 12% to 15% EBITA and the return on capital employed 19% to -- by 18% to 23%. What we have not included here for your model is the, what we call unallocated or the overhead/head office cost. I've seen that some of you have been allocating them fully to one of the baskets. We have not yet given specific guidance on what the -- that basket will be. But of course, that should be lower than what we currently have. That's what all I can say at this point in time. So if you summarize all this, I think looking back '21 to '25, quite some steps have been taken there.

Of course, not everything what has happened in the last 3 years, especially in the outside world, we were able to predict, but there are also elements from our own side, where we have to learn in the sense that we are changing some of our policies, especially on the innovation part, being a little bit more strict and getting the time to market better so that we have a quicker and better return on the investments which we did.

But at the same time, I think we are at a major milestone right now where we have made a clear choice on what is the dot on the horizon for TKH and we will embark on this path, especially on the separation in the next 12 to 18 months. Of course, we keep you communicated and up-to-date on what the different progress elements are from that point of view. That concludes my part. We take a 5-minute break, and then we'll be back for Q&A. Thank you very much.

[Break]

Okay. Yes, I hope you enjoyed the presentations and learned a lot because, therefore, we spent a lot of time in preparing everything. And I hope also you got a good impression of my colleagues in the MD positions in the group that they are quite strong and have their shoulders under the business and know what they are talking about and also know how to develop the business in an entrepreneurial spirit.

It's now time for Q&A, not only Qs, but also As. Who can I give the first question?

I'll wait until it's operating. Yes. Martijn den Drijver, ABN AMRO, ODDO indeed. Three questions, if I may, and I'll take them one by one. You mentioned, Alexander, that there were options for electrification. What type of options are you considering an IPO, a full sale, partial sale? Can you elaborate?

I already mentioned them.

Which one has your preference at this point in time?

I had an interview with the local newspaper in the eastern of the Netherlands, and I said I cannot express a preferred option because every option besides my preferred option is then, let's say, not regarded as a serious option. And I believe we really need to look at the best options for all stakeholders. But my colleagues can perhaps disclose their preferred option.

When we talk about capital allocation framework, will that also apply in that order, I mean, for the proceeds of electrification down the line? So first, organic growth, organic CapEx and then...

I mentioned that already that basically that follows the same kind of pattern. But of course, as I mentioned earlier, some of the buckets are smaller in size than what we have had so far.

Okay. Because I do remember that from previous discussions, you were also thinking about reinvesting in production automation, a slightly larger acquisition, that seems to be more on the back burner now, as you said yourself, no large acquisitions. Okay. Just wanted to confirm that. And then on the -- a question for Mark. On the integration within Vision and all the brands coming back to 2. Can you elaborate a little bit on the time frame of when that consolidation and efficiency will be realized? And if possible, perhaps also something about the savings that you're hoping to extract. So a bit of guidance on that part?

Sure. Yes. So it's not nothing and then it all happens. It's already underway. So over the past couple of years, we've already seen a lot of consolidation happening within many of the companies that you've seen there. So Nerian has been merged into LMI. We've seen that Allied Vision, SVS-Vistek have come together. We've recently also changed NET over to be -- to join that group.

And now we're moving on to the next stage where we're starting to address Euresys and the others. Time frame is roughly the next 12 months to sort of complete those actions. But it's in the process of being worked through one step at a time. So yes, we're -- I'd say we're over halfway through roughly in terms of the actions being taken, and we're planning out the remaining actions. So that was the first part of your question, sorry, the second was?

Perhaps an indication as to the efficiency gains, but particularly the cost savings or the tailwind for EBITA margin from that action.

You probably know that better than I do.

I think it has a few effects. One is, of course, some direct OpEx saving. But more important, I would say, is the further efficiency, which is being generated by having, for example, some of the R&D further integrated. So road map alignment and all these kind of things. So the output with less input, that's where the benefit is. And I think also on the commercial side, by having a global footprint better coordinated in terms of sales offices and commercial staff, the benefit will much more come from the top line than through the cost savings.

And just a follow-up on that statement that capitalization will match amortization. You said it won't interfere with our innovation capacity. Mark, again, for you. If most of those capitalized development costs, which will come down a little bit, are dedicated for -- to your business, what more can we expect? What are you working on in terms of new products? Because you've explained already that you have a key new product out, you have the platform. What's the next phase for you?

Yes, it's really putting the pieces together to create those solutions now. So I mean, as a technology company, you need to be continually investing and moving your products forward. That's going to create a base of just simply ongoing developments. But again, I think this is really where we've been very inefficient in the past. So when we look at what we've done in the way that we used to develop products, we're now able to do that much more efficiently. Even from the perspective of looking at, for example, Allied Vision and LMI. We used to have entirely different product divisions.

We would build -- LMI would build their own camera boards, Allied Vision would build their own camera boards. The latest generation LMI sensors are using Allied vision cameras inside of them. So we can remove that portion of the portfolio and basically not duplicate unnecessary efforts even across the 2D, 3D boundary that we've previously sort of established in terms of the management of the business. So it really now allows us to go after those solutions for the different markets to work with customers, to customize and again, really focus on adding value at the system and solution levels.

Okay. Got it. And then my final question, it's perhaps not even a question, but a suggestion, if I may. You actually outlined the new structure. Unfortunately, some of the elements that will remain within the reporting lines because not everything will be excluded from the guidance. And your guidance already excludes certain elements, the other/noncore parts. But while you're reporting those will remain in within the reported results.

So my suggestion would be automation, no split between the 2 because it's now one business. Other noncore holding consolidated. Otherwise, if you keep those other noncore businesses within automation, we have no way of tracking the performance of electrification and automation. That would be my question/suggestion.

David Kerstens from Jefferies. I was wondering, can you elaborate maybe about the decision to divest electrification, the rationale for it? I understand it's only 40% of your turnover, lower return on invested capital, more asset intense, lower valuation multiples in the market. But having said that, it has the highest growth profile and the strongest potential for margin recovery. And I think you also mentioned that you don't have to wait until 2028. You mentioned maybe 2026, 6 to 18 months. How quick will you get to those targeted levels already by 2026?

Quite quick. So we will see already a big step forward in Q4 so that the gap held between the quarters in '26 is already much smaller than it is compared to the first half few quarters. So that has also led to the fact that we should not postpone it too long. And you might get a higher multiple in '26 or '27 and a lower multiple in '28 because the profitability is higher. So I believe we have very good visibility that I believe we can come to a transaction in the coming 12 to 18 months already and get a very reasonable valuation and accelerate then also the investment, the reinvestment into the core business of automation.

If you have to postpone that by another 2 or 3 years, you might also miss opportunities. And yes, the heart is really in automation. You could perhaps not believe I look more at the cable guys since the last few years. But I created the automation business. And I believe it deserves really this priority. And I believe we are not putting a discount on the value in the end for electrification. And yes, it has also a very good stand-alone perspective. So there are more options. The option of an IPO is really there.

We have consulted already 12 months ago with an investment banker, and they said, yes, that is a good option also. And so we have not a preference, and I'm not going to disclose now a preference. But yes, that has to do with the timing. And anyhow, it does not bring synergy to have these activities together. And we all know that. We knew that longer ago.

It was a big opportunity to do this strategic investment. If we get -- look at the valuation we think we have, it is a fantastic multiple we get on the investment. And yes, at that point of time, when we did this investment, we didn't dare to go into the acquisition mode of the automation business because the multiples were so high and then EUR 150 million investing, yes, was not a smart idea, we believed. And then if you look at what happened at TKH, yes, and we can turn back the situation, it might have looked different, but we can't turn it back and we take the best out of it now in respect of this multiple that we can achieve on the investment that we created. And then the return is far above 25% per year.

So Ruben from Kepler Cheuvreux. I just had one on electrification to start with. Just thinking about the fact that you -- I was thinking about how do you -- how are you willing to look forward with this asset, right? Because you've obviously had CapEx fully completed. It doesn't sound like you're going to be adding more capacity at this point. Also on the OpEx side, it doesn't sound like you will be having more incremental costs.

So from a customer point of view, you obviously had very high commercial successes, 80% tender wins, 30% market share. Is there sort of a risk that the order intake might dry up at this point? If you look at future customers, they maybe see an owner that is in transit. So yes, just curious around your commercial strategy at this point for electrification.

Yes. We believe that we can handle this in the right way. And the desire to work with us is extreme because of the unique position that we have. So I believe the risk of, let's say, kind of pause with customers is relatively low because of the unique position that we have. And I believe also such a process should not take too long because then the uncertainty might get bigger and bigger. So that's why we pointed to 12 to 18 months, and that will be the focus.

Okay. Okay. And I think just to have some figures right. So I think in the past, you talked about 1,200 kilometers of total capacity. I think the -- one of the operational directors in the video talked about 60 kilometers a month, so annualized 720. Was that -- like the full scope was referenced?

No, it is referenced against the order book that we have created and will create further. So for '26, we are looking at around 600 kilometer to be able to utilize. And yes, that will move up then gradually to even, I believe that the -- when we look to '28, '29, we are getting close to 1,000, 1,200 kilometer even. But we always said the business case is based on 600 kilometer. We have a sound margin at 600 kilometer. And that is the first priority, and that is what you see back in the guidance of the return on sales and return on capital employed. If we can go beyond, then of course, these figures look much better than that they are presented at this moment.

Okay. And then I just had one for Mark actually on Vision. I think you provided lots of detail here and particularly the Slide 7, I think, with the addressable markets was very interesting. Obviously, you play in all of these or at least 5 to 10 and so on. Also in terms of the verticals, it sounds like you're all over the place in the sense that the other bucket is still 40%. So I was thinking like what could be sort of the merits thinking at it like, okay, would it be possible to hyper specialize going to one specific vertical that is very high growth. For instance, Security Vision, you have 9% CAGR, which is higher than the machine vision one. Like how do you think about, yes, maybe more specializing in certain areas of the machine vision market? And also, how do you think about actual software development in terms of doing it internally or acquiring it?

Yes. I think the first portion to recognize with machine vision is that a lot of the products are very horizontal in nature. We can build one product, and we can sell it into food scanning, into lumber production, into automotive. And the same applies across these technologies. So when we provide that segmentation, we're not developing necessarily a product for a segment, but rather a product that serves multiple segments. The last challenge, of course, with this is with the distribution channel. Sometimes we don't have good visibility on actually where the end users are. So a large portion of that other probably does allocate back to some of the other verticals. We just don't necessarily have good visibility on the reporting for that.

So from a focus perspective, this is what we're trying to do in terms of as we approach that -- really that solution layer, this is where we're looking at high-growth applications where we see a substantial demand, and we really want to focus our resources on productizing specific solutions for those markets. And as much as possible, we try to leverage the previous technology that we've got in the portfolio to make that as simple.

And maybe a good example of that is when we look at something like pre-weld where you're analyzing parts and trying to work out how much material to add in the volumes and the path, we actually can leverage a lot of the work that we've done in consumer electronics for adaptive glue dispense, where you're analyzing glues between parts and then you're programming robots to move down paths, dispense liquid adhesives.

They're very similar applications when it comes to the technology stack, but they're in totally separate markets with different approaches and wouldn't be immediately obvious to the outside world, the technology overlap that exists with them. So we're -- it's complex, right? It's a combination of horizontal-based products, taking your building blocks, looking at the key opportunities and then prioritizing your resources towards them.

All right. And you see lots of capabilities internally to be developing.

Oh, absolutely.

Yes. Because I think in the last 2 years, I think you showed this chart as well, like the last additions you did within software, vision software.

Correct. So that was in the vision-guided robotics, right? So we're bolting on key technologies where we need them or to give us a boost into certain markets and certain applications. But we've really reached a point where we have a very, very strong technology base across all of the different product segments that we can leverage now to really try to dominate the market.

Maarten Verbeek of The Idea. I'd like to get back to the capital allocation. If you now look what's going to happen in a couple of months or years, you have completed your strategic investment program that has harmed your free cash flow lately, but that will turn around. You mentioned yourself your capital expenditure will go even below what was normal. You expect a recovery of the profitability.

Even working capital doesn't require any cash proceeds because it's too high, even money will flow from that part to your bank account. On top of that, you will have several divestments, which will bring also tens, not even if not hundreds of millions, excluding electrification. Why don't you simply allocate those proceeds, particularly from those investments for share buybacks instead of this new dividend policy of allocating 3% as cash dividend and on top of that, share buyback since that is fairly meaning -- not really meaningful.

I'm not sure if it's not meaningful. It's -- if you would take the last dividend payment, for example, you would apply the 3%, probably you are close to a dividend of about EUR 1 instead of the EUR 1.50. So further EUR 0.50 would fall down in the share buyback bucket, which is EUR 20 million, which is on this amount small. When you talk about the future proceeds, I mean, as I said, probably a larger chunk ends up at the lowest bucket. So from that point of view, I think this is actually helping a little bit your statement that more ends up in the share buyback. But it's a different statement than saying that proceeds will be used, let's say, completely or whatever statement you want to make for share buyback. We still want to do the things which we have to do. And I think in the end, you might be right that it goes exactly as you say. But let's do the things first.

Assuming that the whole of smart connectivity systems, so including energy, including electrification will be sold to a third party and that would raise your asset base, how much cash is allocated to your assets. You talk about EUR 900 million. How will you handle that?

I think it's a little bit premature to get that specifically highlighted. But obviously, I go back to what we have mentioned on how we deal with these things.

So that even could include capital buyback of EUR 500 million, EUR 600 million?

Again, I mean, speculative now. We will deal with that, and we'll come back to you with the proper, let's say, statements at that point in time.

And then one question regarding Smart Vision. You mentioned you are moving from components to systems to solutions. Can you give a breakdown what contribution those 3 have within your portfolio?

Estimating, we're probably sitting at about 50% components right now, probably in the 30 -- 35 systems and then the balance in solutions.

Any other questions? Chase, sorry.

Chase Coughlan from Kempen. Just a few questions, maybe starting with Mark as well on the vision systems. I think it was touched on earlier that you expect the security vision market to grow almost at double the pace of the machine vision market. Could you provide a little bit of a breakdown in terms of the margin profile between those 2 businesses? Qualitative is okay, but how should we think about that progressing going forward just given the differential in the market growth? Or is it more product specific?

So I'm not that familiar with the security vision side of things. So...

I mean -- if you look at the -- what we call the security vision part, margin-wise, slightly below what we see, of course, within the machine vision part. but healthy for sure.

Yes. Okay. And then maybe moving to the cables business. I think I saw on the slide show that you mentioned 132 kV cables as potentially an innovation going forward. I know, obviously, some peers are also offering this at the moment. How do you plan on innovating and still being competitive in that space if it's still a newer product for you? Do you have, maybe the sustainability angle again? Or is there a sort of a playbook there already?

If you look at the current portfolio, the sales funnel I was talking about, it's about 90% -- it's 66 kV.

30 kV here we are. We are the only one today that can manufacture and deliver that type of cable because it needs to be a dry design. And no one in the industry has this dry design for interray cable. So there is a dry design, but that's with lead. And the market does not want to have that.

It's too expensive, and it's, of course, environmental not good. And we have the big advantage that with the current dry design, we can easily move. There's no development at all. Only we need to get this, what is it, certification. But all the components that we need in manufacturing are exactly the same and also the materials that we use are for 95% the same.

Okay. Yes, that's helpful. And then my final question, just regarding the fiber optic divestments. Could you provide any more color on either a time line behind that? Or will there be, let's say, a number of smaller divestments within that or one large chunk of divestment? Just so I can get an idea of maybe when we should see some proceeds also with regard to leverage and such?

On the digitalization, we are working hard on 2 parts. One is, of course, the ultimate divestment. But secondly, we also have to make sure that we have the right condition. What I mean with that? We have, as I mentioned earlier, in the first half this year, transferred quite a lot of capacity and closed down actually our operations in the Netherlands and moved that into the facility in Poland.

And we want to make sure that the proof points of this strategic shift are also there and getting back in some kind of valuation. So the horizon for that is not years, definitely a lot, it's quarters, but we need to have that first part. And sure, if there will be, let's say, a kind of one, let's say, chunk for digitalization or some split, that's not our biggest concern at the moment. We want to make sure that the performance is right in taking the right steps towards the ultimate divestment. Michael?

Michael Roeg, Degroof Petercam. I would like to challenge Mr. Slobbe on the growth profile of tire equipment. Because you explained that growth will be a bit more muted given the slow order intake from the Tier 1 -- but typically, I would say your growth profile is market growth. There's the potential for more outsourcing by the Tier 1s.

Is that everything you've fitted into your long-term growth profile? Or is there also the third element that historically, you only sold the assembly tools and now you're broadening the base by also selling component tools, which basically doubles your addressable market. How much of that is in your projections? Or is that something for beyond '28 to quickly ramp?

To get it recognized in revenue, I would say, beyond '28 significantly. Right now, we are -- yes, in the field of what you call the UNIXX platform called the additional addressable market, I would say that it will become more substantial in the growth figures post '28.

From previous sessions, we know that there's a launching customer, but therefore UNIXX as a complete integrated system, but you're also selling them as individual modules. Could you tell us a bit more, is that especially being adopted by the Tier 1s or the Tier 2s? Or is it broad-based?

It's broad-based, I would say. with repeating orders from those who have their first UNIXX belt makers installed, for instance.

Okay. And there, you're basically gaining market share from the incumbents and then -- but it's still modest compared to where you are with the assembly.

Thanks, Michael. Any other questions? Then I will move to my closing remarks. A big thank you for attending this meeting also in the audience in the webcast. I believe the key message is clear, focus on the automation and capitalize and execute, and I keep it that short. So we can discuss afterwards if there are any further questions or remarks. But I believe that is, I believe, a good move forward. We are excited about that.

We are completely passionate and focused to be driven to make it happen and what we disclose in targets and hope to see you in our next meeting, probably that is next year with the annual results, where we will host, of course, in another webcast and also a physical meeting for the analysts. And in the meantime, we will announce our quarterly results, I believe, on the 10th of November. And of course, we will also then be in calls with many of you. And again, thank you for your attendance, and I wish you also a lot of success in your business and making the right choices and advice -- give the right advices where to invest. And I hope that TKH has a special place. Thank you.

Good morning to everyone, especially the participants here in Amsterdam in the Crowne Plaza Hotel and also everyone in the webcast participating for our presentation of the first half year results. I start with the cautionary note regarding the forward-looking statements. I'd like to point out to you to carefully read what is in this note. The next slide is about the highlights of the second quarter and of course, the first half year. The first half year was not easy, especially not in the second quarter, with an EBITDA down with 27.8% and especially due to a weak development in the smart connectivity systems. And within Smart Connectivity, we saw a big impact of the completion of the launching project for the interray cables in Eemshaven.

We had a good start in the first weeks of Q2 in April with realizing the first long lengths in Eemshaven. But after that, we had continued difficulties in meeting the requirements for the launching project and especially related to the long lengths we had to manufacture. We saw very good progress. So in the first processes -- the first 5 processes, everything went smooth. But in the last 3 processes, small issues led to big impact of not being able to supply long lengths. And that was a kind of big blockage in the plant for which we could not get to output, and that led in the end also to a very low output.

We solved most of the production issues in Q2, although also in Q1, we had good progress, but that continued in Q2. And we see a gradual improvement also of the production yields, but the main, let's say, success is that we can manufacture and we don't have this blockage because of the long lengths that we had to manufacture for the launching customer project. With the higher output that we will see because of more smooth manufacturing and shorter lengths that we have to manufacture, we will see a catch-up effect in H2. And although it will be back-end loaded, July and August is also a vacation period with always in our production sites, a lower output. Let's say, performance in the other activities was quite solid, especially in Smart Vision.

We saw in Q2 even a 12.4% organic turnover increase. And we saw that the adjusted EBITDA was up 35.4%. So really good performance there. What is also good that we had organic growth in the end in Smart Connectivity, and that was mainly related also to our service turnover from the project that we won last year, where we are not only supplying cable, but also do survey works and that is under the label for us as service turnover.

Overall, the turnover was up 1.5%. And so yes, we are quite happy with this organic growth, which could have been much higher if we would have a smooth operation in the plant in Eemshaven. We made further progress on the strategic agenda. We announced further focus on automation and electrification. And yes, we are preparing further, of course, for the Capital Markets Day on the 25th of September. And we announced the divestment of Dewetron, which is part of the manufacturing systems with a one-off profit of EUR 36 million, which will be realized in Q3. The next slide is about more specifically the key figures in Q2.

Again, we see here the organic growth rates in Q2. I pointed already out to the 12.4% of Smart Vision. And what we see is an organic turnover decrease in Smart Manufacturing. That is related also, of course, to the catch-up effect we saw last year with an extreme good performance in Q2 in especially the tire building area. And then we saw the Smart Connectivity Systems still having an organic growth, although the impact of Eemshaven of 9.1%. The first half year, I believe it's important to point here at this sheet at the order book. Order book came down somewhat. I believe that is more incidental.

We see that there is a very good pipeline of orders and sales funnel, especially for smart manufacturing. And so we are quite optimistic for Q3 with respect to order intake there. And the same applies to the other segments where we see also within smart connectivity in the onshore energy cable that the market is really picking up. We already saw a small effect in Q2, but that will continue in the second half year. And the outlook already for '26 is very positive, which a much higher demand because of the rollout that is functioning in a much better way overall in the network companies in the Netherlands.

The percentage of innovations was at 16.4%, very important to keep innovating in TKH, although we keep our focus also on execution of the existing activities and build on that. And yes, to remind you that the innovations are coming from new products and systems that we introduced in the last 2 years. Yes, the next slide is a more detailed overview. Of course, you have been able to read that all in the press release. I deep dive a little bit more in Smart Vision.

We saw an extreme good performance in machine vision, especially in Asia, consumer electronics, the battery business was doing really well. And we see that, in general, that market was doing well. also looking at performance of some of our competitors. But also 2D did very well with the bigger projects we had in the defense industry, which is getting more and more important in the Smart Vision activities with good perspective also for the medium term, where we see that we are penetrating as, let's say, yes, the best positioned company to deliver the systems that are required. Security division had a moderate growth, and that has to do with timing of projects. So we see that we have some nice projects on hand that we will deliver in the second half year. So the performance in Security division will be better even after the moderate growth we saw already in the first half year, better in the second half year.

Smart Manufacturing, I already pointed out to the low order intake in the first half. We see that especially the Tier 1 is not, let's say, at full speed for ordering, but we see in the Tier 2 and Tier 3 customers that the order -- let's say, the investment appetite is quite high. We also see that reshoring is a very high priority to invest in the Western world with capacity. And we are very well positioned there. Due to timing, I believe the order intake in Q2 was somewhat lower and could have been higher as, let's say, only a few weeks later orders come in. And again, with a very positive outlook for Q3 and Q4.

Also good news that we delivered the first UNIXX system, yes, delivered. We are now already in Q3, and it's expected in Q3. So that is good news. Good performance. It was in the end, delivered earlier than that we had in our plan also because of pressure from our customer here and very well execution led in the end to an earlier delivery. Also good to point out here to the divestments of HE and EKB. So in the comparison base, it is important to take that into account, again, related to our focus on automation. And yes, in the end, the performance of Smart Manufacturing with a drop of result of almost 20%, mainly related to the strong result we had in especially Q2 last year and the catch-up effects that we saw there.

Smart Connectivity I already pointed out to the onshore activities. So that looks very promising. We were quite underutilized in that area in the past 2 years. We kept capacity available. So also we absorbed cost to be able to react quite quickly, and that actually also happened that within a fortnight, the development was completely opposite to the period before with very high demand not coming from one customer with several customers. And we are able to serve that demand in the second half year and current perspective for 2026, that looks also very promising, and we are preparing for that growth, that substantial growth in a very short time period. Again, we solved most of the production issues in the Eemshaven, although the output in Q3 will not be very high, but that's more the vacation period, and we are very careful in running the plant with a limited number of operators during the vacation period.

A lot of further improvements have been made. It is really, again, a state-of-the-art plant. And like we had in it just takes time to run it really -- to get it to smooth running, but the potential is there. And we are really confident also for a big step-up in our volume in the second half year. Digitalization had a quite difficult market situation. As you know, we closed our plant in the Netherlands and integrated these activities now in Poland. That still had a relatively high cost level also during Q2. The completion finished in -- by the end of April, and we see during Q2 further cost reductions and Q3 will be a big step-up in respect of performance compared to the previous quarters. So there, we are also active with self-help to see that we get our profitability up.

The profitability was quite negative in the first half year. But yes, with the reorganization and focus in -- of our production in Poland, we believe we can get to a much better performance with also very short lead times to gain market share in the digitalization market. Then last but not least, the SDG turnover is quite important for us in our positioning to our customers. And we see that sustainability is really important for our customers. We have pointed out in other presentations towards the activities of VMI, where we support our customers to be more sustainable in their manufacturing, and that's a very, very nice USP if you can support that with good and high-end technology.

Also interesting here to mention is the award of EcoVadis that VMI received the gold medal and very important to understand that we are in the top 5 companies in the world that are the most sustainable companies. Again, it's not based on an ideology. It is based on having a better and more opportunities in our customer base with USPs to develop the business of TKH. And the other KPIs we see in almost all cases and improvement in our development. So far, my presentation, I'd like to hand over to Elling. I forgot to move on. Sorry.

Thank you, Alexander. Good morning, everyone. Indeed, I'll walk you through some of the financials related to the first half. As usual, first of all, I'll start with the geographical distribution of our revenue. A little bit of change compared to prior year. If you look at the Netherlands and the other European countries around us, then you see that the overall revenue is about 57% in that particular area, and that's lower than last year by about 4%, 5%. That shift has taken place with the benefit going to Asia and North America. Within North America, the U.S. is quite important. Roughly half of what we sell there is coming from our tire machines.

And the remainder is coming a little bit out of machine vision, but also our security projects are finding its way there. But still, the European base is, of course, the center of gravity, I would say. Walking with you through the P&L, and I'll walk through the different items here. Briefly mentioned by Alexander, if you look at the top line, organic growth of 1.5%, as you see in the breakdown on the right side of the sheet. Acquisitions and divestments reduced about 20%. That's 2.3%, 3% reduction out of divestments and 0.7% coming out of acquisitions.

An important item as well is the added value. If you look at the added value, 50.7% of revenue compared to 51.8%, a reduction here, and that has to do also with -- I think already mentioned, the huge efforts which were deployed in the first half in the Eemshaven. A lot of material went through, not everything find its way to the top line. And at the same time, also, we had part of the revenue stream outsourced services, which, of course, do not carry the same contribution margin as we have on our integrated portfolio.

That leads to the operating expenses, EUR 355 million, roughly in line in absolute figures with prior year. But it has to be said that, of course, OpEx has been reduced by the divestments mostly. So if you look at the underlying growth, it's about 4% of OpEx, partly to do, of course, with the efforts, as mentioned already within the Connectivity group, where we have, of course, deployed more headcount and have a different profile in terms of cost structure going forward. The adjusted EBITA, you can see here that actually we got a little bit of help from the acquisitions, and therefore, the organic part is minus EUR 17 million, corresponding to 18%.

Going down below the EBITA line, and you'll find this also in more detail in the press release, especially in the, I would say, attachments to the press release with a further breakdown of the one-offs, EUR 16 million, and it contains basically 3 main elements. One is the M&A cost, but an important part goes into what we call the transportation cost due to the delayed ramp-up of Eemshaven. It has already been mentioned, we completed the order, which we had outstanding. The initial launching customer project has been executed, but it resulted in different delivery dates as we had to spend more time on getting it produced, resulting into also more project cost in relation to additional transportations.

Thirdly, the restructuring costs and digitalization, the impact of the consolidation of the various plants. Of course, in 2023 and '24, we consolidated the Chinese operations in the new Polish plant, but also in '24 in the first half, we consolidated the Haaksbergen operations. Haaksbergen is closed, no more production for fiber optics there. And as a result, we are now also taking further steps, the rollout, at least of the related cost structures in the new structure. And that has impact on several locations where headcount reduction takes place.

And at the same time, and that's also what you see later on in the Item 6, the impairments. As assets have been moved and relocated, it also leads to some asset write-offs. So out of the EUR 4.4 million on impairments, about EUR 4 million is related to impairments connected to fiber optic networks as we have now everything consolidated in a new location. And of course, production there is at full swing. So from that point of view, that entire project has been completed with the impairments, with the restructuring and the full ramp-up of the production, which is going in the right direction.

Then on the result of associates, very much linked to prior year. We don't have that kind of result this year. But last year, as you might recall, that was the effect of HE. The financial result, EUR 11 million negative, compared to EUR 15 million last year. We have a slightly lower interest cost compared to prior year. But also here, we have some impact of foreign exchange. We have an income of EUR 1.9 million in H1 compared to a EUR 1.3 million negative exchange rate effect in the prior year. And on the tax rate, about 25%, as we have seen also last year, and that's also for you to use for in your full year outlook.

Then moving to the balance sheet items. As you can see on the right side, I think that's an important one is the working capital. Working capital in itself as a percentage has slightly increased compared to last year, and it's too high. We don't want to be in the range of the 19% plus. We see though underneath also positive trends. I think I mentioned in the previous communications that also in vision, we have had high working capital, that's nicely coming down. But what we see as a reversed effect coming out of the lower order intake in the tire building machines is that, of course, with the lower order intake, less advance payments are coming in. And that basically reverses the improvements which we are making in the other segments.

So it doesn't look good at top sheet, but underneath there is progress. And once, of course, as confirmed with the outlook for H2 order intake starting to come back in tire building machines that, of course, gets back to a full benefit and also in the working capital segment. And of course, the 19.8%, as I mentioned earlier, is not where we want to be and it's not where we should be. We had at the end of last year, a 17% plus range. And that, of course, is also at least what we target for by year-end. Looking then at the side effect of that being the net debt. We started the year with about EUR 500 million. Cash flow from operations, almost EUR 70 million, pretty low. It's not a surprise, I think, if you look at the underlying performance of some of the segments.

But of course, we also had still in the first half some spillover of our CapEx program coming out of '23, so the cash settlement of that in the first part. So you see here in this chart, about EUR 40 million is CapEx related to PPE. That's not at the level where we see it in the second half. That's more going towards EUR 20 million and gets back into the line of the outlook, which we have mentioned earlier. And at the same time, the investment in intangibles, close to EUR 30 million is exactly as we had a year ago, of which the majority is related to our R&D expenses.

But it leads to an overall increase of net debt of about EUR 105 million to be exact, with a debt leverage of 2.6. Last year, this time, it was 2.3. Deleveraging will take place as performance will increase in the second half, but also the settlement of the Dewetron exit, which has not taken place, cash settled at least, at the end of H1, but expected to be in the third quarter. Then if you look at our free cash flow, the result of the last 2 sheets basically, then clearly, not a satisfactory picture here. But as we have seen in many occasions, the second half should bring a benefit as we have seen also last year.

I mentioned already the CapEx program. And again, I referred to the point that the CapEx for PPE is disproportionately high in H1 compared to H2. Then I move on to the outlook. If you look at the 3 segments, then first of all, when we start with Smart Vision, we have a very strong performance in the first half that's expected to be continued. Therefore, turnover and adjusted EBITDA in the second half are expected to grow compared to the first half. And that's on the back of some larger security orders, both in Machine Vision as well as Security Vision.

For Smart Manufacturing, as anticipated because we have been communicating earlier about the lower order intake, Smart Manufacturing for the second half turnover and adjusted EBITDA is expected to be lower than the first half on the back of a lower order book at the start of H2. The order intake in the first half was impacted by uncertainties in the, I would say, geopolitical and trade-related issues, tariffs, et cetera, and the continued lower investment from the Tier 1s, which have not spent a lot of CapEx in the last couple of quarters. But we expect though that the order intake in the second half is going to be up as it looks very promising what we have on the plate currently.

Then at Smart Connectivity, the turnover and adjusted EBITDA for the second half are expected to grow substantially compared to the first half due to the projected higher output levels in Eemshaven and the increased revenue coming from accessories and service. Furthermore, in onshore energy, we anticipate a further increase in demand from the network companies that support a higher utilization in our factories in this segment. And within digitalization, a lower cost level and a better utilization rate will also improve the results in that segment.

So all in all, subject to ongoing market uncertainties and bearing unforeseen circumstances. On balance, we expect turnover and adjusted EBITDA for the second half '25 to be substantially higher than the first half and to be above the level of second half '24. So far, the presentation, and I think we would like to invite you for Q&A, if there is any question. I can imagine so.

Yes. The first question is, I think that there's a bit of a disconnect between the guidance TKH is providing and the way the stock market is interpreting that. And of course, then I come to the Connectivity division because at the full year '24 results presentation and also in Q1, you were basically talking about EUR 170 million potential revenue at an EBITDA above 20%. You reluctantly, if I recall correctly, gave us, let's say, some information about the revenue levels of '24, slightly loss-making.

We were trying to get more insight in the performance of the onshore cable and the telecom business within that division to get a sense for what the sensitivity of the earnings is. So if you are skeptical, then how much visibility do you have? As you just explained that you had a very complex cable contract in the factory, but how much visibility do you have on the next project going into the factory that will yield the expected numbers? Because in all honesty, we have seen the margin going from 10% 3 years ago to 8% to 6% to 3%, and you guys also have seen the share price reaction, and now it's at 1%. So -- and yes, for me, it's difficult to say, but you're feeding us with a lot of positive information and the actuals are complete opposite.

While everybody in this room knows that costs exceed, let's say, potential revenue and results, but somewhat more conservatism would be much appreciated because to me now, it's all over the place. Listening to your presentation, the telecom business is also negative now in the first half, a negative EBITA result. And that was not the case last year.

Not in the first half, but the second half.

Let's be very specific. When we talk about digitalization, that is a different set of companies and revenue stream than the pure telecom fiber optic business. The fiber optic business is a segment within the digitalization. That segment is a minor part within digitalization and carries the effects of the, let's say, the whole market effect of, let's say, dumping from Chinese 2 years ago, the antidumping measures which the EU took, our self-help of closing down the capacity in China as a next step in the Netherlands. So there's a lot of ongoing in order to get that back on its feet. That's not the same as when we talk about digitalization.

Digitalization is a bigger basket. And you can see from the disclosure, it's about 24% within the Connectivity segment. So roughly EUR 85 million, let's say. And as I said, less than half of that is related to the fiber optic side, but the fiber optic side is where we carry our headache. And that's where a lot of steps are taken. And that's where basically we have finalized in the first half, the consolidation of all capacities in one location, the restructuring ongoing and the capacity is running. So from that point of view, that is a different basket, I think, than putting that across digitalization, but also the second -- the first part of your question is slightly different than only this part.

And the onshore cable?

Onshore cable?

Onshore, that is recovering now. So I guess that the margin is then also improving a bit.

That is profitable.

Last year and the first half of this year?

Yes.

And then can you give us some feel for the way you look at giving an outlook and also the way we should interpret it because that was basically the main question.

Yes, I believe that is a really good point. Of course, we see the deviation in the estimates that were in front of us and in the realization. It is a big, let's say, puzzle and difficult decision what you communicate. So there was, let's say, in May when we announced the first quarter, it looked really positive in respect of the development of the production. And we had just manufactured the first long lengths in Eemshaven and it went much more smooth, we solved all the 5 processes, which were really critical. The processes after that were not critical at all. But some issues happened. You cannot imagine and believe what stupid actions happened through which we were not able to manufacture the long lengths.

And so we don't have that crystal ball to see what could go wrong. And so yes, you can say we were too optimistic with the guidance we gave. But yes, the other way would have been that we would say we don't know what is going to happen, and you have to just see what comes out. I believe that would be also very strange. We are really on top of this activity. We have had good information to not be much more negative in May than what we in the end see in the result. It was really, really difficult to get this project completed. And -- but we also developed through that, a much better competence in manufacturing also long lengths now.

So that is a kind of unique situation again that we had also with the long lengths we had to manufacture in a new plant. We will never do that again when we build a new plant. The question is, do we ever build a new plant. But also from a reference in our plant in , we have never seen these sometimes also stupid causes and issues that we saw in the Eemshaven. And yes, that is the only explanation that we are much more negative than perhaps that -- or that was let's say, in the estimates of U.S. analysts.

Yes. And then, I mean, the next project is simpler?

Much simpler. Yes.

But are you sure about that?

100% sure. We are also manufacturing at this point of time. And the good thing is we now have to deliver link lengths of around 1 kilometer. So we manufacture longer lengths. But if we have a miss and that the length falls into 2 parts, 10-kilometer falls into 2 parts, you have still 10 link lengths available. So that makes life much easier. And we will be able in the end also to manufacture the long lengths very smooth without any issues. But it is too difficult in a factory that you have to start up, and it's really the highest level of technological advancement in the technologies that we have in that factory. We have the best technologies. We have also asked for external people to judge that, that also to open up our mind, did we make mistakes or something like that? No, it has really proved again that we have the best available technology to meet the specifications that we have to manufacture.

Okay. And then if I look into '26, I mean, you have the order book. Are all the projects now in the order book simpler, more simple to execute?

Yes.

So there's not a risk that we have a very difficult project going into the factory next year and again, yielding problems?

No. In the end, we will have also projects in the future with longer lengths. But we have sufficient time to further optimize where potential risks are, although I believe we have solved or eliminated more than 90% of these risk for the long lengths. And we have about several projects still available for optimization and also reduce the operator dependency. This is the risk of an operator that makes a mistake. And so we want to reduce further the operator dependency. But the technology is ready for long lengths.

Okay. Yes. One small follow-up, and then I pass the microphone on to someone else. You mentioned, defense clients in SmartVision. Do you know -- you have visibility on what kind of products that goes into or maybe names of some of the defense contractors?

Names not, but we know where they are deployed, and we are very careful with making sure that we are not on the weaponary side, let's call it like that, but more in the manufacturing and situational awareness where these kind of cameras are deployed.

And the organization has to be screened for that in order to become a supplier?

Yes.

So you have those permits and certification processes?

Exactly.

.

To continue on the inter-array and offshore and onshore energy. Combined, it was approximately between EUR 190 million and EUR 195 million turnover. Could you give a breakdown between how much revenue in onshore and how much revenue in offshore?

I think if you look at, let's say, the range, EUR 185 million, EUR 190 million, if you call that, then roughly about, let's say, 30% or so is related to the offshore part.

That's then about EUR 50 million or so. Does it imply because previously, you said EUR 170 million of revenues for onshore that we should expect EUR 120 million of revenues onshore in H2? Or has a bit been...

It's in that range, maybe slightly lower. But in all fairness, the buildup is slightly different compared to what we communicated in the past. Because as you know, we have an order book, which includes one specific contract where we have a larger scope than just cable manufacturing. And that scope will also have its revenues in '25, including in the second half of '25. So if you look at our outlook, not everything is coming out of cable manufacturing, but also of the supply of call it, the scope related to an integrated project.

Okay. Could you remind me, you signed a contract for Waterkant in Q2. When is production for the project?

Waterkant project, yes, we signed that.

Yes. But when was production planned?

Production in '26 -- late '26 or beginning of '27.

Because if I recall well, Waterkant has also very lengthy inter-arrays. So will you have solved the problem by then? How sure are you that you will be able to produce those things?

Now based on the current knowledge that we have, we will be 100% certain that we are fit to manufacture the longer lengths. And we are also close to another project where we have the same cable types, which could be a kind of risk mitigation if we would have a miss that you still can deliver shorter lengths. So we are really careful in that respect. But yes, it is not extreme in the end to manufacture length of 20-kilometer plus cables. The layout, the technology is completely focused on that and should be capable of doing that.

And lastly for the moment. How is TKH acting on the tariffs the U.S. government is implementing? Will you be simply passing them on to your customers?

Yes.

Yes. And we have the advantage that we have hardly any local competition for the technologies that we deliver to the U.S. We have such unique propositions. And for part of the vision cameras, we have the opportunity to have a location quite close to the Canadian border to open up a manufacturing plant where we can even move people from Canada to the U.S. to manufacture if that would be necessary. Michael?

Michael, Degroof Petercam. Well, I have to come back to Eemshaven as well, of course. During Q2, you came across several unexpected setbacks with that very long cable project. Have you learned from that? And should you today start with the exact same project, would you be able to execute smoothly on that same cable?

Yes, we have learned lessons, but there might be still issues.

Okay. And the goal of a new plant with all the learning curve and so on is, of course, to eventually reach 100% productivity efficiency and so on. Where would you rank the plant today in percentages compared to that 100%? And where was it at the end of 2024 to see what kind of slope of learning curve there is?

Yes. It's very difficult to exactly say that -- at the end of Q1, it was at less than 10%. It was developed in Q1, Q2 to the end of Q2 to 60%, 70%. And yes, today, we are already closer to 80%.

80% in terms of where you want to be productivity and smoothness of the operation. I'm not talking utilization.

Yes.

Okay. Then during the presentation, you mentioned that connectivity or I assume it was subsea cable will be back-end loaded. Should we assume something like 35%, 65% sales split between Q3 and Q4?

It could be close to reality.

Okay. And of course, the operating profit will also have quite a big difference between the 2 quarters.

Well, one comment there. As I mentioned already, we have in the second half revenue, not only based on cable manufacturing, cable delivery, but also on services and other elements, which are part of the scope. And that's, of course, having a different kind of margin profile than when we produce something ourselves. And therefore, the timing of these events decides about Q3 and Q4 result taking without further details at the moment.

Yes. Good. Then the onshore energy cable, the past 2 years have been difficult because you built -- you have a factory for the Netherlands, which is sold out, but your customers have difficulties with all the permits and cycle times. Now you seem much more enthusiastic, demand picking up, outlook '26 would -- is that because permitting has become easier, change in regulation? What is causing this better momentum?

The network companies have found better solutions to organize the rollout. So part has to do with permits. A very big part has to do with their organization to make projects more simple, also to get faster permits. And that execution is really doing really, really well.

And that's broad-based throughout the Netherlands.

It is throughout the Netherlands, yes. It's not one customer. It is, I would say, all of them. So it looks also like a Dutch solution that has been found.

Okay. Have you also been selling outside the Netherlands as you intended?

Yes, we made good progress there, and we will continue with that in the coming years, especially for high voltage. We see great opportunities in the U.K., in Ireland, which is also a market where there is hardly any local manufacturing. We see in Germany, we see in Scandinavia. So that will be a very nice building stone to build further on and to, let's say, deleverage our presence in the Netherlands and the risk of being a sole supplier only in the Netherlands.

Okay. Is it too early to assume you're going to be sold out in this activity next year?

Sold out could be the case. But yes, we also have capacity available in Eemshaven, which we can allocate to, let's say, the onshore business. So we still have a lot of opportunities to create also in a simple way, additional capacity.

Okay. Now my final question, turning to the left to Harm about UNIXX. The launching customer will receive their first UNIX system in Q3. Can you share us a bit of the road map of that customer, their plans for testing it over a certain period and then perhaps adding more systems to their factories. Is that something that they have shared with you? And what would be the time frame and the potential magnitude?

Sorry, I have to stand here because of the camera. Well, very exciting project. Also, the customer is highly excited. What we see in the coming period as it is now being installed the machine. We expect in the second half of this year, a lot of new tires, prototyping tires for both the very high-end market as well as for very-high-speed tires. So we guess a couple of months for a lot of development and testing. And then probably that customer can decide on road maps in their different portfolios. What is already clear is that for their main production of the ultra-high-end tires for the passenger car market, there is a rollout in the coming years foreseen for several machines coming in. So that looks good, but it might be even a wider portfolio than expected. And in the meantime, we are also developing the same UNIXX technology for motorcycle tires. And that could be an addition also in the coming years. That's longer term, but all in all, this UNIXX technology opens up a lot of perspectives for the coming years.

So the outlook is quite good for the high-end tires for this particular customer, ideally, once they get convinced and things prove right, you get sort of the generic tires. Is that also something that is on the road map? Or is that still too far away?

No. It is -- in particular, for this customer who is focusing on the high-end market, that is not so much in their portfolio, I would say. But this technology is clearly also very helpful in making -- well, you could say, middle of the road hazard normal tires in a very efficient way. For that, we did with a number of different various customers in the last couple of months also some testing and that also looks very promising. So all in all, we are very positive on the longer-term outlook for this, also for the -- to completely replace over time the conventional tire production, but it takes time. So it's not this year or next year that it will be material in the revenue foreseen.

Ruben Devos, Kepler Cheuvreux. Sorry, in English. I wanted to continue on Eemshaven, of course. I was just curious about the fact that, obviously, with long cable lengths, thinking about sort of the portion of the market that you would not be able to address maybe in the meantime. I think you talked about near term, certainly, you think to have more simple production, less long cable lengths. So in terms of the addressable market, like what portion would you maybe miss or would be less of an opportunity in the next 2 years?

No, we don't see any project that we could not, let's say, accept and or be positioned in the best way we can position and against competitors. So also last year, we won, I believe, 80% of the projects that were available, and it continues at a very high pace at this moment. So the capabilities are really fit for the market demand.

Okay. And I remember maybe there was a number called out before of 600 kilometers in cable lengths for next year. Is that -- you confirm that, that could still be...

At this moment, we confirm that, yes.

Okay. And that's, let's say, fully secured or part of it is still in a competitive?

No, we still have to win 1 or 2 projects. What, of course, helps that we also shift some of the deliveries to '26 from '25 to '26. So we are getting much more close now to the 600 kilometer.

Okay. For Poland with the consolidation of your activities there. Just thinking about what could be sort of the breakeven utilization rate, for this activity for fiber optic specifically that you would need?

I think if you look at the cost which we are bringing down through the restructuring that within the second half, we will definitely get to the breakeven point. That doesn't save the whole year, but of course, that's the step up towards '26 where we believe that we can be profitable.

Okay. Sorry, you would need like what is it, 70% of fab loading like utilization?

No, I think it's a little bit more because we have restructured the way how we have capacity available because in the previous setup, we had a different locations capacity. And that has been consolidated, but also, therefore, put in a kind of different structure. So we don't take the entire portfolio from the past, and we also don't have the exact footprint in terms of machinery, and that has brought down already the capacity level, and therefore, we will be quicker to a higher percentage of utilization. But it's not just cable manufacturing. It's also the, what we call, connectivity proposition, which goes with the cable systems, and that's also an area of growth. And that combination will give us the upside. But utilization rate is really reasonably well. But again, the efficiency has to improve similar to the Eemshaven. We can do what we promise, but it has to become more efficient in actually getting it done. And that's the path for the second half, and we are well on track with that.

Yes. Yes. And then I think for connectivity as a whole, I think it's probably a question also for the Capital Markets Day next month. But obviously, your added value has dropped here, I think, almost 6 percentage points in connectivity. Obviously, my question is what is the realistic midterm target? You've had this incident in offshore. Obviously, you've now consolidated activities in fiber optics. What could we be modeling or looking forward to potentially?

That's a good question about capital markets. But just to give you one comment on that. If you look at the 45% in added value connectivity last year and 39% this year, for sure, elements of, let's say, the extra effort, the material consumption, the waste, et cetera, in order getting the project for the launching customer in Eemshaven completed has a negative effect. But also, as we mentioned, the distribution of revenue, which includes services, which are outsourced, they don't carry the same added value as our own production. And that component, of course, within Connectivity has a negative pressure on the percentage of added value, and that's also what you see in H1. But we'll address this in the Capital Markets Day.

Okay. And just a final question, unrelated to Connectivity, but rather on Vision. For Security Vision, that's expected to pick up, I understood from -- as of Q3. Are these sort of projects tied to rather specific geographies or specific end markets? And is the -- and are the margins sort of at par with machine vision?

If you look at the projects, I mean, we have seen already quite a nice path of more sizable projects in the last couple of quarters, and that is still ongoing. very much related to larger projects in North America. And of course, in these size projects where we have indeed unique features, and that's why we're winning these projects, we also have good pricing power. It doesn't mean that the overall margin of security is at the level of machine vision, but it's a comfortable margin, which we are able to get there.

It's , ABN. Just could you explain a bit more about the order book in smart manufacturing about the customer behavior? What have you seen in the past few months? Why is it -- it has come down probably you said uncertainty about tariffs. Are there any other reasons? Anything you can say about customer behavior? And has it changed over the past few weeks?

We -- well, it has not really changed over the last couple of weeks, but for already a longer period of time, I would say, since Q3 last year, the overall order intake for equipment in the tire business was at a lower level than in the couple of years before, and that had mainly to do with, you could say, a couple of reasons. One is the enormous influx after the COVID period and the recovery of markets after that. So there was an uptick, which faded away a little bit since last year. And the second reason is that you saw a large pressure on the automotive market, mainly in Europe, also in the U.S. where the Tier 1s, so the larger players in this industry who are really exposed to OE supply, so the first mount tires that volume was coming down, companies under pressure and the appetite for new investments was a bit lower. That was a period that already started end of last year.

So that's why we also guided for this year a lower revenue and order intake as the years before. We expect that to continue for the -- you could say that continues for this year and perhaps next year. What has added -- what has been added to this situation is the unclarity on the whole tariff situation for North America. And that caused a lot of companies who were already in the process of discussing projects to be a little bit cautious and just wait and see, you could say. And that hesitation has brought, yes, you could say, in an effect that caused a lower intake than we expected as of the beginning of this year. But that effect should now be, you could say, resolved since it has become clear what the tariff situation is and the effects of that.

At the same time, you still see a pressure on the automotive market in Europe, Chinese imports in Europe and pressure to export to the U.S. So we expect that -- you could say the Tier 1s will for the moment, continue with some hesitation in this, but the pickup is really foreseen in the Tier 2, Tier 3 area where we see a lot of appetite for investments outside of China and Asia Pacific. So that combination mix that we expect for the second half a higher order intake than -- much higher order intake than the first half of this year.

Just on the last question on the . You reiterated the 600 kilometers, but there was originally a margin plan for 16% EBITA. Is that still realistic?

I believe that was even mentioned 20%, but you're right, it was 16% that we mentioned for the whole year, that is impossible. For the second half year, we are getting very close to that margin. But that's not the overall connectivity margin that will be somewhat below that percentage. But it's a big step-up compared to the 1% we had in the first half year.

Okay. And the last question also is related to . This is a question from Martijn actually. About the liquidated damages that was probably the reason for your loss there what you reported.

Not the reason for the loss, but the liquidated damages. I mean, it's about damages which have to be compensated. And the discussions around damages very much concentrated about extra deliveries. beyond the scheduled delivery times of the cable due to the delays which we were facing, and that resulted in additional transportation costs, and that's also what we have been highlighted in our communication, and that's a one-off which we have described here.

Because the mic is here, , ABN ODDO as well. Related to working capital, you highlighted there the fact that the order intake within manufacturing systems is lower and that had quite some impact on the milestone payments you received. How is the dynamic there going forward? Because you expect an uptick again. But in case of lower activity, would that imply such a lower working capital as well? Or...

I mean the way our intake affects the working capital is by the down payments, the advanced payments. It's not on the progress payments. They are a normal part of your model and the receivables and the work in progress, et cetera, but it's very much about the down payments. And as intake has been low in the first half, the down payments have been low. And that, of course, is a negative for working capital despite the fact that we had compensation in some of the other segments, we were still seeing a slight increase in the absolute figure. Second half with higher order intake expected in the manufacturing, that means also that the deposits will come in and that will then reverse the situation compared to H1, and that's a help in the second half compared to a negative in the first half.

Do you meet orders for that?

That's independent from working capital targets. It's an area where, of course, we see the opportunities and we have guided for that. This looks very promising and that we have a definite higher intake in the second half than what we will see in the first.

In case of normalization there, where would you go to working capital-wise as a percentage of sales? What was more or less the leap because you already said underlying, we did a very good...

Yes, I don't think we will achieve the 15% yet. But of course, I believe that we will be better as a percentage compared to the end of '24, and that was in the 17.5% range. So we expect to be below that.

Okay. With the Thai manufacturing orders...

Not only, also the, let's say, the continuous progress on getting working capital down. It's a combination of both. I think there's also online maybe a question. .

Can you hear me?

Yes.

Okay. With respect to the performance of the Manufacturing segment, last quarter, I mentioned that the CapEx at the Tier 1 manufacturers went down minus 5%. And then Alexander basically mentioned that there was no direct relations and that they didn't really see that there was some hesitation, but that they started to see the pickup again. So I'm just wondering, based on the comments and the outlook then, Alexander comments basically made me assume that the impact would not be that negative, that organically the decrease should have been less than 5%. We have seen like a 9% reported decrease. So I'm just wondering how do you explain the fact that at Q2, you still saw like the pickup and then now you reported minus 9%?

We see still that the import duty effect seems to have a bigger impact for the Tier 1 players. And they are also more strong related to the OEM business and the OEM business is, I believe, in a much more severe situation compared to several months ago. So that leads, I believe, to more hesitation and Harm commented already that he foresees now that they will be not back before '26 and perhaps even late in '26.

That's clear. And then with respect to the outlook for the second half, there is still quite a big gap to fill with respect to the EBITDA to get above the second half 2024 level. It's roughly EUR 30 million, let's say. I would expect that the largest part, around EUR 20 million would be driven by the pickup in the Eemshaven facility as more or less in the right magnitude order. And then the remaining EUR 10 million will be mainly driven due to the digitalization part of the new facility in Poland, some cost savings there and an improvement in the Vision segment. Is that the right way to look at it for the EBITA improvement?

I don't want to, let's say, confirm on line item. You're right that the biggest contribution will come from Connectivity, and it has these 2 components without getting to the breakdown. And of course, on the other side, you see that Vision will continue its strong performance in the second half as well.

You stated previously that you will divest the digitalization business. Will you start in that process once you have recovered, once you have become decently profitable again in that division?

Well, I mean, of course, a profitable business improves the chances of a successful divestment. That's obvious. So that's why probably you don't have seen a kind of move in the first half of this year as there was a lot of work in progress. The benefits are coming through. And we'll see what is the optimal structure of this divestment. It contains various items, as I mentioned earlier, the fiber optic side on one side. There are some other components. And we just have to, let's say, get to the right path up in order to get that done. And I think probably it's also a little bit more for Capital Markets Day when we have a little bit further view on the portfolio going forward than today's H1 results.

Okay. Then secondly, your sales funnel in the area, 11,500 kilometers. I'm bit surprised because it has increased over Q1. Whilst I've seen that, for example, filled auction in Germany, postponements of projects and still this number is increasing. You mentioned it's still only Europe. What do you really look at and determining the sales funnel? Is it -- have projects already have seen the FID? Or how does it work? How do you...

It is the requests we get for quotations and the start of the tendering processes that we see. So it's real projects that are planned and are in some ways at an early stage, already tendering now for a project in '28, '29. But yes, there seems to be that more and more projects are generated in areas here in the North Sea, Germany, especially, we see a lot of commitment to new projects. And yes, I believe it's good that we have this KPI of showing you the number of kilometers. You read a lot of negative news in the newspapers about postponements, but this is the real fact. And it's not created by ourselves. There is also a lot of public information about all the new projects that are, let's say, being tendered.

When we look at the inter-array market, in Europe itself, not so much is happening when we look at new capacity. However, if you do look at what's happening in Asia, where a $360 million investment is being made to build a quite a large marine cable manufacturing facility. One is even being developed in the U.S. And particularly, this U.S. customer says that it will or it has secured 18 months of volume for export to Europe. How do you see that competition? Is it really a local market? Or do you also expect competition from Asian manufacturers in Asia and also from North America market?

From North America, there is no capacity available for...

This one is being constructed, and I mentioned they already have 18 months of volume in the order book.

We have not seen them in any tender. So yes, I don't know what is the truth. Then with this, let's say, information from Asia, there is some competition. But what we see is that the additional transportation cost is a real negative, let's say, competitive edge. And what we also see is that especially within Europe, there's a tendency to really go for local and protect also from a risk point of view with all kind of sensor technology, which might be in the cable to secure that you have a local supply in Europe and not from another location where there is a risk.

Yes. I also have a follow-up, Tijs Hollestelle, ING. Yes, I was thinking about the, let's say, the internal reporting deadlines. I was also thinking that you have the Capital Markets Day in the 25th of September. For Machine Vision, it's kind of smaller contracts. It's probably the same for onshore cable. So probably the lumpiness is in the tire business, both on the results and the order intake when you deliver the project and on the subsea cable. So how much visibility do you think you have when you're standing on the stage on the 25th of September? Because as you mentioned, July and August are not the strongest months of the third quarter. So you only have, let's say, visibility on underlying demand for a couple of weeks.

We are not going to bring forward the Q3 reporting into the Capital Markets Day. That's not the case. It's the same when we make our, let's say, outlook right now, of course. So there is a certain model which we use. And you're quite right, it depends a little bit on the different segments, what the feasibility is. And in some cases, of course, also what the actual effect is. There are certain activities where, let's say, the final acceptance test of certain products is decisive in the overall results and revenue taking, which is at an end of a certain process in manufacturing. And that's no different as we do it now.

So from that point of view, I think we will be having, of course, our radars and internal structures working to be as best prepared as possible for the 25th of September. But it falls all in line within the regular outlook reporting as we have scheduled on our intervals, half year, Q3. These are the right kind of moments. And of course, there will be some flavor in the Capital Markets Day, but it doesn't go beyond that.

And have you put more pressure on Tier 2, Tier 3 management to, let's say, provide more accurate information to you guys?

We get on a weekly basis, we get turnover information. So we have a dashboard that is quite clear in that respect of how the performance in the months is developing. It's not that we have to wait at the end.

Yes, it's already quite efficient, I mean.

Okay. No questions anymore. Then I'd like to thank especially the participants in Amsterdam and also the audience for being in this webcast. Thank you.