TAKKT AG (TTK) Earnings Call Transcript

[Audio Gap] for joining TAKKT's earnings call for the first half year of 2023. [Operator Instructions] I would now like to turn the conference over to Maria Zesch. Please go ahead.

Thank you. So welcome to our earnings call for Q2 and for the first half of 2023. I'm hosting the call together with our CFO, Lars Bolscho. I will start the call with an overview about key topics and give you an update on the strategy progress we achieved in the last 6 months. Then Lars will hand -- or I will hand over to Lars, and he will give you more insights into the financials. Before we come to the Q&A, I will provide you with an update on our outlook and how we position ourselves for the second half. So let me start with the key topics we see in our first half year. So when we provided our first outlook for 2023 in March, we already expected a challenging first 6 months. This expectation has now been confirmed. We have seen economic headwinds from a persistent inflation. We also saw weak growth, both in Europe and the U.S. And we also see declining market data, especially from the PMIs. Against this background, the first 6 months we're in line with our expectations. Organic sales, 2.5% below prior year. Q2 was minus 1.8%, slightly better than Q1 with a minus 3.3%. So especially if you consider the impact of the Certeo phaseout, which slowed down growth by around 1%, the underlying run rate was only minus 1% in Q2. So we had different growth rates in our 3 divisions and in the different regions. Apart from a good performance in FoodService, I'm quite happy with our core business in Germany, where we achieved positive growth despite the challenging environment. I believe this shows that we are on the right track. On earnings, we saw lower gross profit due to the soft top line and especially also because of a higher share of sales from FoodService. This came in with a lower gross profit margin, and that is due to a high share of project business. On the cost side, we are quite cautious in this environment. We have reduced marketing spend and also our FTE numbers year-on-year. Still, we continue with our growth and transformation initiatives and have incurred some additional costs from this. And we also see an inflation impact on cost positions. So overall, our EBITDA came in with EUR 57 million. We continue with our focus on cost cash generation in this environment, and we released inventory in half year 1. And therefore, we increased strongly our fee cash flow to EUR 31 million. Looking at our strategy progress this year, we are well on track. We see good development, and I will give you an update in a second on FoodService and I&P. We have increased our enkelfähig” share, so the revenues we do with enkelfähig” products to 22% in June. We will continue this push towards more climate-friendly and more sustainable products in half year 2, also with specific marketing campaigns. So after the short update on half year 1, let me give you an update on some of our transformation topics we are currently working on. So let me start with I&P and the growth in I&P. So what has happened in the last 6 months, as already mentioned in the previous calls, we set up I&P as an integrated unit to grow our share of wallet with our customers by offering more categories. And additionally, we want to be on the marketing side also more cost conscious. We are continuously reducing the number of brands here. So in the last 6 months, we strengthened our cross-selling activities throughout Germany, Austria and Switzerland. In all markets, we are above plan with our cross-selling activities. Furthermore, we have continued to streamline our marketing approach and have phased out the Certeo brand in Q2. Certeo was an unprofitable brand for quite a while now, and we decided to focus now on our core brand KAISER+KRAFT. One additional topic I want to mention is that we organized very successful supplier base in the U.K. We had good discussions on market trends in the U.K., but also had some look in interesting product innovations from our suppliers. So -- but most of the work in I&P in the last 6 months has been behind the scenes, and I'm very happy and proud that we are only a few days away now from the relaunch of our most important brand in the group. In August 1, KAISER+KRAFT will launch a new branding and design as well as a new claim. And with the new brand, we can offer our customers now the full range of equipment and packaging products that so far have been split between KAISER+KRAFT and ratioform. So for us, it's another big step towards a more integrated presence in the market and more efficient advertising. This was I&P, let me now come to FoodService. In FoodService, we also have taken next steps towards a more integrated setup and merge the customer-facing functions such as sales, e-com and marketing from Hubert and Central into one organization. This will further improve our push towards more cross-selling that we already started beginning of this year. We have seen very good results with substantial growth contributions already in the last quarter. Also in the back end, we have integrated warehouse locations of Hubert and Central. With that, we will increase efficiency and lower costs in the near term. FoodService was growing significantly in the first half year, and this was specifically backed by higher project business. So looking ahead, we will further expand our cross-selling activities. And in specifics to profitability, we will focus on margin management in project business, and we expect to see improvements from that. We will continue to streamline back-end functions, especially also in logistics and tech, to improve further efficiency and scalability. So the next example I would love to give you on our Caring pillar. Caring pillar is one where we want to make sure that we contribute to new worlds of work in a responsible but also sustainable manner. So after focusing on the internal transformation in the last 2 years, we are now again looking at [ MMA ] and also taking minority stakes in start-ups where we can learn and participate in interesting trends in our markets. And I'm proud that we can announce that we have taken the part in a financing round of nuwo just recently, announcement happened this week. So what is nuwo? nuwo is a workplace as a service provider with a circular business model. They have business customers to equip their employees home offices with attractive and also ergonomic furniture. And for the customers of the nuwo, that also means to become more attractive employers. So we see a very good fit with nuwo as it shows that there are attractive business models with also recurring revenues while, at the same time, creating a new world of work. But let me now hand over to the financials, and Lars will give you more details on what happened in Q2 and half year 1.

Thank you, Maria. Hi, everybody. Let's now have a closer look at our financials, starting with the second quarter and then continuing with the first half year 2023. So as Maria has already mentioned, in the second quarter, we were still operating in a challenging market environment with weak GDP developments and also weak market indicators such as the PMI, the Purchasing Manager Index. Looking at the group's sales development, top line has been soft as already expected when we presented our Q1 results in April. So with the pressure on sales, we are currently seeing we are fully in line with our expectations here. Overall, we generated sales of EUR 319.4 million, down 2.8% year-on-year. And for the first time since 2 years now, we have seen negative currency impacts in the second quarter, mainly from the weaker U.S. dollar compared to last year. So organic growth was minus 1.8% overall, a slight improvement versus the first quarter, which was organically at minus 3.3%, especially if we adjust for the Certeo impact. The phaseout of Certeo that we communicated end of April and completed in June has impacted sales and profit in the second quarter. On the top line, we had a negative impact on organic growth of about 1 percentage point from that. The slight improvement in sales development we see was mainly driven by a better FoodService performance with nice double-digit growth rates in the second quarter, while divisions Industrial & Packaging and Office Furniture & Displays were still clearly below prior year. Let's continue with a look at our profit development in the second quarter. EBITDA came in at EUR 26.8 million, down compared to EUR 34.6 million last year EBITDA margin was 8.4% in second quarter this year after 10.5% in the second quarter of last year. The decline in EBITDA was mainly due to the lower absolute gross profit in the second quarter as a result of the already mentioned soft top line. In addition, gross profit margin was at lower level in the second quarter, 39.3% versus 40.2% in prior year due to several reasons. First, we have seen a negative structural effect, first of all, due to the division FoodService with structural lower gross margin growing strongest. This contributes with approximately 2/3 to the decrease in gross margin we see. And there is a second structural effect due to higher share of larger orders and project business in our divisions, especially within FoodService, but also within Industrial & Packaging. Second reason for the lower gross margin, we were running in the second quarter against a comparatively strong gross profit margin prior year, especially at I&P. I will come to that in a few minutes. Third reason, we were selling down Certeo inventory with a discount in the second quarter due to the closure of the business. And last reason within the division FoodService. As expected, we were operating with a comparatively low gross margin in addition to the higher share of project business, I've already mentioned that, also due to the sell-down of older inventories with some pressure on the gross margin, but positive impact on cash flow. Looking at the costs in the second quarter, we continued with our cautious approach, adjusting costs to the lower demand and at the same time continuing with our transformation and growth initiatives. For the second quarter, this means we significantly reduced our marketing spend, and we continue to be cautious with hiring new personnel and replacements. FTEs are down year-on-year. At the same time, we continue with the implementation of our transformation in the more integrated setup. In the last 3 months, we incurred additional costs from building up our tech group function. For example, the cloud infrastructure and our analytics capabilities. And we also have higher expenses from the ongoing integration process in FoodService. In addition, Q2 was impacted by higher onetime expenses compared to the previous year. In total, these came to EUR 2 million and were mainly due to the mentioned phaseout of Certeo. And in cost, at the same time, we are continuing to see, as expected, some inflationary pressure on our costs. So in total, 3 bigger effects that led to the lower EBITDA level in Q2, the weaker top line and there with the lower absolute gross profit, the lower gross profit margin and the impact from onetime expenses and transformational costs with the main reason being clearly the pressure on sales out of the economic conditions. Looking ahead, we will continue to balance growth and transformation on the one hand, and gross margin improvements, cost management and cash improvement on the other. With this balance, if pressure on top line would remain in the second half, we would even increase our focus on those 3 areas. More on that when we talk about our outlook. Let's have a look at the division, I&P now for the second quarter on sales. Sales were at EUR 170.3 million after EUR 178.5 million last year, a decline of 4.6% reported and 4.3% organically. The closure of our Certeo activities had a negative impact of around 1.5 percentage points on level of division I&P. So the underlying run rate is closer to minus 3%. We continue to see different developments between our regional activities within I&P, more challenging in the U.K. why we see very good signs from Eastern Europe and also Germany. In our view, the good development in our home market in Germany is especially promising given the weak market data, for example, from manufacturing PMIs we are seeing. On profit at I&P, EBITDA was at EUR 21.2 million, down EUR 7 million compared to a strong prior year. EBITDA margin came in at 12.4%. Again, the lower gross profit is largely a result of lower absolute gross profit and onetime expenses. On gross profit, the lower sales level was the main driver. In addition, we have seen a decline in gross margin versus prior year. We had a very strong prior year with a gross margin of close to 44%, and now we are a bit below the 43%, which is still a good and high level. In this number, we have -- and within this number, we have already digested the impact from the Certeo phase out. On costs, it's a very similar story in I&P as a group level. We have significantly adjusted our marketing costs to a lower level of top line activities, and we were very cautious on the personnel side. On the other hand, we have seen the expected impact of inflation costs, and we have continued to invest into our transformation. And on the level of division I&P, already mentioned several times, please consider the higher onetime expenses resulting from the Certeo exit. Now continuing with our U.S. activities. First, with our division Office Furniture & Displays. Let's start with the top line development. Here, we saw a slightly weaker environment in the second quarter in the markets for Office Furniture and especially for Displays compared to the first quarter. Sales were at EUR 71.5 million, down 12% compared to the second quarter 2022. The currency effect was negative with an impact of 2 percentage points. So organic development was minus 10.3% against a strong prior year, where we still saw double-digit growth. As mentioned before, both businesses currently have to deal with weaker markets, which we see clearly in our main market indicators, such as the Restaurant Performance Index or the BIFMA order intake. Displays2go, our sales were declining in the high single digits. At NBF, the decrease was more around a low double-digit organic decline. Looking at profit, EBITDA was impacted by slower growth and came to EUR 6.0 million for the quarter after EUR 7.9 million in 2022. EBITDA margin resulted in 8.3% in second quarter this year versus 9.7% last year. We were able to compensate some of the impact from the lower top line on absolute gross profit by good improvements in the gross profit margin. So we are continuing here with a positive trend from the first quarter. Gross margin was clearly above prior year due to lower freight costs and good management on the price and discount side. On cost positions, we are missing the operational leverage that we were able to generate with our good growth last year, and we have to digest also here some expected inflationary pressure as well. Let's continue with our third division, FoodServices, and with the sales development. Despite the challenging environment, we achieved strong growth at FoodService, even better than in the first quarter. Sales increased by 12.7% to EUR 77.5 million. Also here, slightly negative currency impact due to the weaker U.S. dollar. So the organic growth was even at almost plus 15%. This was due to good top line performance at both brands, Hubert and Central, especially an increase in the project business, but also good results from cross-selling, which is significantly above plan and supported in growth. On EBITDA, also an increase here, but at the same time, some adverse effects. We generated EUR 3.9 million in EBITDA this year, after EUR 3.6 million in the second quarter last year. In terms of profitability, we see a slightly softening development with 5.0% EBITDA margin compared to 5.3% last year. The biggest factor continues to be the gross profit margin. We had already talked about the margin pressure in FoodService in our last call. The gross margin of FoodService is negatively impacted by the sell-down of overstocks and the negative mix impact out of having more project business. On cost positions, we had some impact from the ongoing integration process but still achieved some operational leverage, which partly compensated the lower gross profit margin. After this, more detailed look at the second quarter, let me walk you through what that means for the first half of this year. I'll keep it shorter here since it is very often a repetition of the same effects and trends that I've just presented to you when talking about the second quarter. Looking at sales development for the group. Our sales for the first 6 months was minus 2.4% below prior year. Positive currency effects from the first quarter and negative effects from the second level each other out so that organic growth is almost the same as reported growth with minus 2.5%. Looking at the 3 divisions, we see FoodService achieving high single-digit growth in the first 6 months a very nice success in this difficult market circumstances, both I&P and also OF&D are showing negative growth. On EBITDA, we achieved EUR 57.0 million in the first half year with a margin of 8.9%, which is a decrease of around EUR 10 million. Profitability last year was at 10.2% for the first 6 months. The main driver for lower EBITDA is absolute gross profit, where we are down around EUR 8 million due to the pressure on the top line. The gross profit margin, we were able to keep pretty stable with minus 0.2 percentage points. More on that on the next slide to come. Against this background, we were cautious concerning our costs. This shows in a significantly lower marketing spend and also a lower number of FTEs for the first 6 months, which is down approximately 2% versus prior year. At the same time, we made the conscious choice to stay fully on schedule with our transformation. We are currently building a basis for future growth in top line and in profit, and it would not make sense for us to slow down or interrupt projects and initiatives. And in addition to that, we also saw the expected cost inflation on personnel and on other costs, and from that, an impact on our EBITDA in the first 6 months. Onetime expenses were similar in the first half year to the level of 2022. As you know, one of the focused topics this year is our gross profit margin, which we are working on to improve towards our target value of 40% this year. As you can see in this bridge, after the first 6 months, we are very close to the 40% at 39.7%, down 0.2 percentage points versus prior year. And you can also see here what impacted our gross profit margin development in the first half of 2023. Biggest negative influence is the structural effect from the higher share of sales of our FoodService activities with structural lower gross profit margin. This is an impact of minus 0.5 percentage points on the group margin. With our focus on gross profit margin with passing on price increases, improving our pricing methods and actively working on optimizing our product and freight costs, we were able to largely compensate the described negative structural effect and keep our margin almost stable. In my view, a very good performance in this environment for the first 6 months. Looking at the 3 divisions. In I&P, we were minus 0.2 percentage points below prior year. This is due to the phaseout of Certeo. If we adjust for the Certeo impact, I&P has a stable gross profit margin in the first half. At division OF&D, we continue to see a very good improvement by almost 2 percentage points driven by NBF, where we benefit from improvements in freight costs compared to prior year and from strict margin management to keep this benefit in our pockets. At FoodService, our gross profit is 1 point -- or gross profit margin is 1.1 percentage points lower than in the first half of '22. As expected and also shared in our call for the first quarter, we are still seeing the impact of selling discounted inventory at Central in order to reduce our high inventories and also the negative impact of the higher share of project business, which comes in with a lower gross margin. We will continue to focus on gross profit margin, something we focus on, especially in times of pressure from economic conditions on our top line. Let's go to the -- into the details for the first 6 months, starting with I&P division. And again, starting with the top line, we recorded EUR 350.5 million in sales, a decline of just below 5% and slightly impacted by negative currency effects of 0.5 percentage point. Organic growth is at minus 4.3%, again with a more negative development in the U.K. activities while Eastern Europe is growing and Germany and Scandinavia are stable. On EBITDA, we are at EUR 48.1 million after the first 6 months compared to EUR 55.3 million last year. EBITDA margin was 13.7% after a very good 15.0% last year. The lower EBITDA was again mostly a result of the weaker sales and lower absolute gross profit. On costs, for the first half, we spent significantly less on marketing, while other cost positions were impacted by inflation and the ongoing implementation of our transformation. Onetime expenses were on a similar level in first half of '23 compared to the first 6 months of 2022. On the next slide, we see the first half year at our division Office Furniture & Displays. Sales came in at EUR 144.7 million, 7% below prior year. Organic growth was minus 8.1% after adjusting for a slightly positive currency effect. Displays2go developed slightly negative after a stronger first quarter, while at NBF, we saw a stronger decline in low double-digit range compared to a very good first half 2022 when we still benefited from also converting order backlog into sales. Weaker top line is also reflected in the profit development. We generated an EBITDA of EUR 11.4 million after the first 6 months. EBITDA margin was 7.9% compared to 9.2% in the prior year. On gross profit margin, we are seeing good improvements and can compensate some of the negative delta resulting from the lower sales level. I've already talked about the reasons for the good gross profit margin development at OF&D. On the other hand side, the weaker top line has a negative influence on EBITDA due to overall missing volume. On costs, we are overall almost stable compared to prior year. So in total, we see higher cost ratios because of less leverage of our infrastructure at the moment. And with that, only FoodService remaining as division for the first half. As in Q2, overall, a very good top line development here in an environment that is far from easy. Sales increased to EUR 146.0 million, which translates into an organic growth of 8.9% after adjusting for slightly positive currency impact. In the first 6 months, we generated very similar growth rates at the brands Hubert and Central with high single-digit growth. And we achieved this performance compared with the strong first half 2022 that already saw double-digit sales growth. So really a strong growth performance here. On the profit side, we have very similar developments compared to the second quarter. EBITDA for the first 6 months is below prior year at EUR 6.5 million. EBITDA margin ends up at 4.4% for the first 6 months of '23, after a 5.9% last year. The gross profit margin was below prior year due to the impacts from sales mix and discounted inventory I already talked about. Together with a strong sales development, this resulted in slight absolute gross profit increase versus prior year. On the cost side, we have seen increases similar to the sales increase. So generally stable cost ratios when we adjust for higher onetime costs associated with the integration. Overall, despite the nice sales growth development, we see declining profitability due to the challenges in the gross profit margin and the further investment into our transformation. Let's look at cash flow now. As you know, one of our priorities for this year and a very positive development in the first 6 months and also a very important KPI in this uncertain economic environment we find ourselves in. Starting with the TAKKT cash flow. This was down a bit more than EBITDA in the first 6 months mostly due to a lower financial result, resulting from the higher interest rate. So overall, a decrease of TAKKT cash flow from EUR 58.9 million to EUR 45.0 million. In net working capital, you can see the focus we have been setting for this year. While last year we have been investing into our working capital and had a cash out of more than EUR 50 million, we have now significantly improved that and had a cash out of only EUR 7 million. Biggest impact on change in net working capital is the cash-in of almost EUR 20 million from releasing inventories. Last year, the buildup of inventories led to a cash outflow of around EUR 40 million. With CapEx being slightly above prior year, this development leads to a free TAKKT cash flow being at EUR 31.4 million, and with that, a very good improvement compared to last year where we were cash negative after the first 6 months. You might remember, we then had a very cash strong second half last year. This year, we will continue with a focus on net working capital and cash generation, and we expect a significantly higher free cash flow for the full year. I just also want to manage expectations and ask you not to expect the same level of delta versus prior year from the first half also in the second half. Let's continue with a short look on the balance sheet. No surprises here as I can still present a very strong balance sheet. Our net financial liabilities have increased due to our dividend payment in May to now EUR 154.8 million, whereof EUR 60 million are lease liabilities. Due to our strong cash flow generation, net financial liabilities should substantially decrease until year-end, unless we would be able to pursue an M&A opportunity. As a result of the dividend payment, our equity ratio declined slightly to 60.2%, but remains above our internal target corridor of 30% to 60%. And with this allows us to continue to buy back shares, look for M&A opportunities and also pay dividends. Having mentioned share buyback, let me share just a quick update on our program. Since the start of the share buyback in October 2022, we used around EUR 8 million, approximately 1/3 of the allocated volume of EUR 25 million. In view of this remaining potential and a positive experience with the program, we prolonged the share buyback program until the end of 2024 with our decision taken end of June. The total volume remains unchanged, therewith around EUR 17 million are available for further purchases. Before I hand back to Maria for our outlook, let me summarize the financial update. In a challenging economic environment we are in, we are performing on sales growth well within our own expectations. And so far, even a bit better than expected. We are cautious in our cost management, even if we see some cost increases due to our transformation and also some expected inflationary cost pressure. And our focus on gross margin and especially on cash flow pays off, especially our good development on free cash flow is something I want to emphasize as a success for us in the first half. And with that, over to you, Maria, for our outlook.

Many thanks, Lars, for the Q2 and also the first half year. As both of us explained, it's a challenging situation. But in this environment, we believe we are doing the right things and we are also performing. I believe the teams are working hard and doing a good job, and we also see that we are fully in line with the expectations we had for the first half year. So what does that mean now for the second half of the year? When we first published our guidance in March, we highlighted the high degree of uncertainty. And we look forward to an upswing in the second half of the year. So let me come to our estimation for the economic environment. We are now in Q3, and we still see uncertainty. We faced a very volatile demand, which leads to ups and downs in different regions and also in our divisions. So what I can say is there is no clear trend. Overall, we have seen an improvement from Q1 to Q2, but there's also markets where we see demand slowing down. That means risks, but also opportunities for us. So in July, for example, we see a growing demand, both in IP and also in FoodService. On OF&D, we still -- we see an improvement, but still not yet on the gross cost. So I would say or I would call that, that there are a lot of moving parts at the moment on the demand side. On the cost side, the cost inflation and potentially higher wages, they will continue and they will have impact also in the coming months. And GDP growth looks like it might take a few more months before we really see an improvement there. So given this environment and the uncertainty, there is still a risk of a significantly worse development, even a deeper recession in the core markets. What does that mean now for us? What does that mean for the priorities of TAKKT? So our strategy is clear. We want to grow. We want to become a more integrated company. And we want that impact via our Caring pillar. And as I just said, despite the challenging environment, we are also currently seeing some good developments and an improving demand in some of our key markets. So for me, it remains clearly a top priority to serve our customers and fulfill the demand, which is out there. We continue with our strategic growth initiatives, especially with cross-selling, with pricing and also our initiatives in e-commerce. At the same time, we have to focus on managed costs and profitability. So a main topic for us remains profit margin and the margin management. So we further push measures to improve our gross margin towards 40% and compensate for the structural negative impacts, Lars have mentioned that, of the sales mix we have seen so far. So what we expect is positive earnings contributions from the gross margin measures, but also a very stringent cost focus in the second half of the year. And coming to costs. So regarding costs, we ring-fenced our growth and transformation projects because we will not slow down on the transformation journey. But any costs or projects or initiatives that does not contribute to a more integrated setup or to our growth will be managed very cautiously. This also includes a very restrictive approach to hiring in this challenging environment. So we also continue with our focus on managing net working capital, and we want to build on the success we have achieved in the first 6 months. So the focus there will be on further inventory management, but also on improving on base sales and payables outstanding. So let me then come to the forecast and to the guidance for the full year. I mentioned the expected upswing we initially anticipated for the second half of 2023. So looking now at the current environment, there is a risk we might have to wait for early '24 to really see a significant improvement in GDP growth. This puts pressure on our sales expectation, but still we continue to expect an improving demand from our customer base in the coming months. So -- and why is that? So why do we believe in that? There are 3 factors or 3 reasons I would like to highlight. First, we have a much higher or much weaker comparison base in half year 2 than in half year 1. So a much weaker comparison base. Second, the order intake in July and the more optimistic feedback we get from our divisions towards the second half of this year supports a slightly better second half. As I said before, order intake in July so far is better than what we have seen in Q2, and this is driven by growth in I&P -- to slight growth in I&P as well as the continued growth in FoodService. As I mentioned, this is still on a declining trend. But also here, we see improvement already. And the third reason I want to mention is our growth initiatives. It should have a further positive impact on our sales development. And for example, cross-selling activities, but also the pricing measures we set. So together with this challenging environment on our current insights on sales, we expect a stable to slightly negative development for the full year. This means -- and this requires an improvement compared to the first 6 months. On profit, we specify our guidance towards an EBITDA between EUR 120 million and EUR 130 million. This still implies a higher EBITDA in the next 6 months than in the first half year. Originally, we had a wider range, and the range was between EUR 120 million and EUR 140 million. So what is now -- or what are the reasons for adjusting the guidance? Well, I think we have talked about half year 2 still being a challenging environment. And despite the mentioned reasons for an improvement in sales development, our initial expectations for half year 2 was more positive. So mid-teen sales compared to our initial expectation brings us to the said EUR 120 million to EUR 100 million. And finally, definitely, it's also about cash and our cash generation. Here, we speak to our initial guidance and want to earn significantly more free cash flow than last year. For achieving this, we are working intensively to improve the net working capital, as I said before, also in receivables and payables and, of course, inventory levels. So this was the guidance. But before I hand over to you to start the Q&A, let me give you just a short reminder about our investment thesis. So first, I believe we have a huge growth potential in a very large and also very fragmented markets. We have a diversified position with our activities in Europe and the U.S., and this has helped us in the past and will also be important for the future. Our vision is clear. We continuously execute on our strategy to bring new worlds of work to life in the 3 pillars across OneTAKKT and Caring. We have a very good financial track record and execution. We delivered on our financial goals and make sure that we do that also in '23. And last but not least, especially in this environment we are, we have the advantage to operate from a position of financial strength and stability. We have a strong balance sheet. We generate substantial free cash flows. And also, we are clearly committed to pay dividends to our shareholders. And with that, I'm happy to take your questions. So first to the operator for the Q&A.

[Operator Instructions] We are now taking the questions from [ Lukas Bang ].

I have just one question concerning your explanation about the July order intake. You said that July order intake was better what you have seen in Q2. So how do you mean that, on an average monthly base Q2 versus July? Or how do you mean this comparison?

Lukas, thanks a lot for your questions. So it's about July and order intake and how we see that in comparison to what we have seen so far, right?

Exactly.

Yes. So currently, so what we see in July is not over, still some days to go. It's -- on an average, we see higher order intake than what we saw in Q2. As I said, in FoodService, we see a very strong trend, same as we saw like the last quarters or the last quarter. And also in industrial and packaging, we see positive growth, a slight positive growth. So that's what we see in July. And in Office Furniture & Display, a better development than in Q2. So in all 3 divisions, a better development than in Q2.

We're now continuing with the questions from Craig Abbott.

Can you hear me?

Yes, we can hear you well.

Okay. Excellent. Yes, I apologize. I'm going to follow up a little bit with the question just raised because I was trying to figure out how to raise my hand, and so I missed a little bit of your first part of the answer. I do apologize for that. But I also wanted to understand a little bit better where you've seen the signs of optimism. What -- if I caught the end of your answer correctly, you said it was across all 3 divisions. But if you could elaborate just real quick again, please, appreciate it. And then I have another question after that.

Of course, Craig. So what we see in July is compared to Q2. And as I said, July is not over, still some days to go. But what we see so far is in I&P, so in Industrial & Packaging, we see slight growth. So better than what we saw in Q2 and...

But were there -- sorry. But were there any particular subsegments you would highlight there where you saw improving demand?

In Industrial & Packaging?