Edited Transcript of ROS.VA earnings conference call or presentation 3-Apr-20 9:00am GMT

The urbanization will also — or will lead to the fact that we need our vehicles to be more compact and the agility of our trucks to be improved and communication to be improved. And the silver society and gender shift trend will need or will trigger a need for our products to make — to redefine the usability of the vehicles. We need to take into consideration health and safety regulations, which will be increasing in the near future because more women are in the fire brigades and more elder people are working in fire brigades.

So to all these 3 trends, our answer is an alternative drive concept, and it is also an alternative body concept, which is granted with our Concept Fire Truck, which I was speaking about also in the recent calls, and I want to give you a quick update on that.

So actually, what you see here is that we got initial orders for our Concept Fire Truck, which is a hybrid fire truck. And so it has a 100-kilowatt-hours battery and a range extender built in. Actually, the vehicle can drive 2 hours or can operate 2 hours fully electric. And that means for the fire brigade, they can do 90% of their operations, just with the electric engine of this vehicle.

You see the initial orders we received from very big and also prestigious fire brigades through fire brigades of Berlin, Amsterdam, Dubai, Oslo and Los Angeles. We are very — especially very proud of the Los Angeles order because, actually, this is the first Rosenbauer Europe truck to be sold to the U.S. and it’s also the first Rosenbauer truck to be sold to these huge fire brigades. They have 3,500 firefighters. They have 1,300 vehicles on operation. And they have 500,000 emergency calls per year. So we are proud of every single one of these orders, but the Los Angeles Fire Department was the recent one, and we are also very proud of that.

So we are in the successful series implementation. The status there is that actually we are going after our plan. We have done some technology partnerships, completed some technology partnerships with Volvo Penta, BMW, Knorr-Bremse, TTTech and AVL. And so for example, with Volvo, that is the key partnership, I would say, we have the battery. We receive the battery from Volvo. We receive the electric engines and the generator from Volvo and also some of the electronics. From BMW, we’ve received the range extender engine. And for example, from Knorr-Bremse, obviously we receive the brake system. So we do not develop these parts, but we are assembling this vehicle on our own. And with this vehicle, we will be also assembling our municipal chassis for the first time in Europe. We are doing that already for the PANTHER. And we’re also doing it already for municipal trucks in the U.S. So we have some experience. But with this, we are intensifying the chassis production.

So we believe the market to be 3,200 of such trucks running in 2030. And you can also see already we got some more reservations for the year 2021 and beyond that from Canberra, Portland, Las Vegas and Vancouver. So there was a U.S. demo tour with the vehicle and the truck is very well received and had, yes, leads to a very positive feedback.

The INTERSCHUTZ exhibition is the biggest exhibition in the firefighting industry. This takes place every 5 years and because of the corona crisis, it was delayed. It would have been taking place this year in June. And actually, it’s delayed until next year. And this is why we will unveil the first pre-series vehicles of the Concept Fire Truck in September this year, when a physical presentation with a bigger audience will hopefully be possible again.

So another development on our product portfolio is actually the cooperation with DJI, which is the world market leader for civil drones and aerial imaging technology. We have a globally exclusive sales partnership with DJI for the firefighting industry and especially for the integration of the FlightHub from DJI, which is the software behind this product. And we can integrate this FlightHub to our EMEREC tool, which is our deployment management software, holding fire safety maps, hazardous materials data sheets and vehicle rescue sheets, for example, and many more things. And the integration is essential for us because this means also that we can store the data of these drones on our Rosenbauer servers, which is very well received and I believe will be a clear customer advantage when we sell these DJI drones in the near future.

So here are some images of this flight drones. So you see this is supporting, of course, the fire brigades in major-damage situations. You can quickly get an overview about flood situation, forest fires, avalanches and many more things with minimum — minimal danger for the fire crews. So it’s also protecting them. And that is very helpful for them. They get real-time information about the situation. And we believe that the time is right to have such product ready. It’s really a big advantage for the brigades.

So I also want to elaborate a little bit about the corona crisis and how this affects the Rosenbauer Group at the moment. We — you see that actually, at this stage, we have no material disruptions in our operations. We are, of course, facing risks on the customer side. For example, we have single cases in Austria where we have cases of corona. So actually, it’s 2 cases at the moment. We have a temporary official shutdown in very small sites, in our sites in France, in Spain and in South Africa. France — Spain will open again on tenth of April. Our site in Italy was already reopened the day before yesterday. And so we believe that these shutdowns are not crucial for our overall operations at this stage.

On the supply chain, we are closely monitoring the situation, of course. It’s important that we synchronize our production with the supply chain. And this is what we are doing every day and updating very frequently. We see here problems coming up in the part of the engines and chassis, especially in — from the chassis suppliers. But in general, we have our material secured for the next 4 to 5 weeks. So we have quite good visibility at this stage still.

From a staff point of view, we saw, of course, concerns and uncertainty in the beginning. So we are now end of week 2 of the situation in Austria. And of course, American sites are a little bit behind in the development, but we see that these concerns and uncertainties also flatten out slowly again. We have — if you look on our sick leave statistics, we are still below previous year’s seasonal level, which is a good thing. And so we have only 58 people on sick leave in Austria at the moment. So we are positive there.

And on the regulations, we are also following, of course, the regulations what affects us at Rosenbauer, of course, the travel ban, be affected by the minimum distance regulations, which we also have in place, of course, in the production. And we are also doing remote work in the offices wherever that is possible. And that is, in most cases, better possible than originally anticipated. So — and we are in normal operations in terms of liquidity, IT works perfectly up to here. We are very happy for that because this is also essential in the offices, but also in production, of course.

So what are our measures, the measures we took and we are taking because of that crisis? We have a crisis management at group level, which is assessing the situation in an ongoing way, also communicating internal, external. That’s also important we saw and obviously and the crisis management is there to safeguard operations and protect employee health, that’s very obvious, I believe.

So we have a rigid health management. We had early travel bans. So we forbid travels in a stage when government was still allowing them. We have a comprehensive set of coronavirus procedures. So you find disinfection fluids all around the company. We have no common lunch breaks anymore where people are sitting together. We have no meetings. We keep a 2-meter distance. And we are cleaning — the cleaning is taking place in a more frequent stage.

Yes, we have a more broadly defined Rosenbauer quarantine, which showed also a good success, slowing down the rate of infection. So we have, at the moment, 84 people on Rosenbauer quarantine which we would not have to do officially. So they are working from home, wherever this is possible. And we have 12 official quarantine cases. This number was going down in the last 2 weeks again.

But of course, we see production cuts back in Austria. We are having — taken forward or brought forward our company holidays, which will start now from next Monday for 2 weeks in Austria. So we took this measure because we do not want to lose the capacity over the full year. So this is the company we would normally have in summertime, and we took it forward.

And after that, we will have short-term work. We want to continue the production. And as I said before, we want to synchronize our production with the supply chain. And we saw that as an appropriate measure to do that.

So if you look on the industry development in the year 2019, we see that actually Europe, North America we’re — and Asia, we are doing quite fine or very good actually, also with good profit from that. We saw a high increase in turnover in these 3 regions. And Central, Eastern Europe is making now 35% of our total group turnover. So we saw very positive development in these countries.

The countries which are highly depending on the price of oil showed also some signs of weakness during the last year. And also at this stage, of course, the oil price is something we are monitoring closely. But still, we could recover in the MENA region or we could actually keep the turnover quite fine in the last year. So we did almost EUR 100 million turnover in the MENA region, which was the same — approximately the same figure in 2018.

The demand in North America was very strong in the year 2019. We see still some possibilities for improvement but — on all sites, but turnover was up by 16% in the year 2019 in the NOMA region, so in North America, and this is very important for us.

We see high procurement volumes in Europe. I was mentioning that Central and Eastern Europe was up in turnover by 25% compared to 2018. And we believe that we can be — or we still have here a very solid home market as we have in North America.

Business in Asia was declining. Especially China, was a little bit lower. In Asia Pacific, our turnover went down from EUR 165 million to EUR 146 million in 2019. But the order intake is in the range of EUR 200 million also in 2019. So we are above the 1-year average, for example, in year 2017, where the intake in Asia Pacific was EUR 150 million for Rosenbauer.

So what is the highlights on our figures for the year 2019? Actually, we have a record figure in our turnover and in our EBIT figure, so we could achieve a 7.6% turnover growth in 2019. I was mentioning the markets responsible for that. So our home market, Central and Eastern Europe and North America were coming up with the sharpest increases in 2019.

Especially the last 3 months, and I have a slide for that later, were very strong. We did a turnover of EUR 364 million, which is the strongest quarter we ever had. And these results — resulted also in a high EBIT figure of almost EUR 52 million, which is also the highest level we had ever in the EBIT figure. There was — in percentage, that’s an EBIT of 5.3%, which is slightly below the year 2018. The reason for that was slightly worse product mix and also some exchange rate differences, which we have to show in the operative result, which amount for EUR 1.5 million.

Order intake was on the same level — on the same very high level like in 2018, and this is also something which gives us the possibility to maneuver in a very good situation through that actual crisis. We see no cancellations from our clients up to here, and this makes us also feel confident.

However, we decided to reduce our dividend compared to last year from EUR 1.25 to EUR 0.80 actually mainly because of the uncertainties coming up with the corona crisis. That is a modest proposal from our side to the general assembly. We are still convinced that we are a sustainable dividend payer with this proposal. And — but we will see what happens actually in the press conference. Just before, I heard the Austrian Health Minister saying that there will be a stop for dividend payment. Whatever that means, we have to wait for the details here.

So I was referring before already to the market survey. We are always relying here on some customer statistics and annual reports from our competitors, who are — they are sometimes coming in with a delay. So we can show you now the newest figures available, which are for year 2018. And you see that actually the global market was growing from EUR 4.3 billion to EUR 4.8 billion. And this was mainly coming from the North America region, which developed very well. I was pointing out that before that we could do even more in sales there. And this is also why we have already now, since middle of last year, but officially starting beginning of this year new COO in Rosenbauer, (inaudible), who is coming also from the sales side and has a lot of experience in the dealer market in the U.S., which is so important there.

We see also the Rosenbauer average or combined annual growth ratio with 5.9%, which we outperformed also in 2019 with a 7.6% growth. So we are doing good. We improved our market share from 15% in ’17, in 2017, to 16% in 2019. And we see the market now, yes, still developing above also the world GDP which has a combined annual growth ratio of 3.5%.

So speaking about the long-term development. You see that we still have some room for improvement in terms of our EBIT margin in percent, but it’s, in absolute figures, the highest number that you see here. And that is coming, I was mentioning it, from the product mix. And that is what we see slightly improved in this year and also improvement in efficiency gains should be — were actually planned. But with the corona crisis, all of that is, of course, somehow covered by this crisis situation.

On the right-hand side, you see also the seasonability of our business. We did, as I mentioned before, a huge turnover and huge profit in the last quarter, which is similar to what we saw last year. Actually, we were better in profitability in every single quarter, but the second quarter, where we had done better last year. So last year, we did EBIT of EUR 9 million in Q2, where we see here now only EUR 3.1 million. In the other quarters, we are always higher in the year 2019.

So where is the turnover growth coming from? I was mentioning already, actually it’s coming from CEEU and from NOMA. So our home markets, as I said. And also, in general, we believe that we have above-the-market growth or we saw above-the-market growth at Rosenbauer compared to that industry. We shipped 2,078 vehicles. This was 1,932 last year. However, the average price is very much depending on the product mix, as I said also.

So looking into the future, we believe that the regions MENA, Asia Pacific and NOMA will further grow in the year 2020. You can see that if you look on the order backlog. So for example, for MENA, the order backlog is EUR 177 million already. So there will be a growth in this year. And also in Asia Pacific and NOMA, order backlog is above the revenue in 2019.

If you look on the profitability, you see that actually, thanks to that huge increase in the top line, also bottom line was improving in the Central and Eastern European — Central and Eastern Europe market segment. And you see also that NOMA is a bit better, thanks to the increase on the top line. MENA is unfortunately lower. This is because of the product mix there. We sold different products in MENA region, and this is the reason for the reduction in EBIT in MENA.

If we look on our CapEx, you see in the gray column that we actually followed the path of consolidation in our CapEx. We — what we did in the year 2019 was investments in our logistics center in Asten, which is actually rented. But still, we have some investments there. We are doing there the SKD and CKD production of our semi-knocked-down and completely-knocked-down material kits, which will or which are then sent out to the group and to also partners worldwide.

We also invested in the robotization of endless welding at Rosenbauer Brandschutz, which is the stationary part of our business. You can imagine for the Stationary Fire Protection, you need a lot of such hoses, steel hoses, which then are built into the buildings. This is done there with a welding robot now. And we also did a robotization of our ladder welding in Rosenbauer Karlsruhe. We were explaining that already in previous calls. And it’s also a very successful optimization project, which we completed in 2019.

On the R&D side, we were actually following the series production readiness of our Concept Fire Truck, I was explaining before. This is the main R&D expense we saw in the last year. We had to capitalize that. And this is why, because it’s a market-ready, according to IFRS, and that is bringing up our capitalization rate to 34%, as you see here.

We spoke about revenues and EBIT already, so I would like to turn your attention to the cash flow, which was unfortunately negative at the end of the year 2019. So we see that negative cash flow, it was much more negative end of Q3 with minus EUR 140 million. So we had a strong Q4 also in cash flow with EUR 113 million. But still a negative figure at the year of the end — at the end of the year. And the main reason was a delay for 1 huge down payment, which we then received in January. Because you can maybe remember, I was still planning a 0 figure there. And unfortunately, this did not materialize, and also some delays in the delivery of our products, which then actually led also to a high spot level. And this negative, especially the negative free cash flow, was also a reason to reduce the dividend at the end.

So that is actually the downside of the year 2019, which is the negative cash flow. And also in connection with that, with the same reason, actually, the increase of our balance sheet figure of our total assets, which rose by 25%. The main part of it, and I will explain it a little bit more in detail on the next one slide, is coming from the inventories.

What is also having an effect is actually IFRS 16, which has more or less no effect on the P&L, but an effect of around EUR 40 million to our balance sheet. So in the footnote, you see the figures without that in — [as a resume] without IFRS 16, our equity ratio would be, for example, 1% higher. Net debt would be EUR 40 million lower.

So I don’t want to spend too much time on the balance sheet. You see actually the increases in the inventories. Receivables were more or less increasing in line. Our liabilities to suppliers were actually increasing positively higher than the increase in turnover and also the down payments, but we see that on next slide, could increase from 10% to 13%. But still, the working capital is increasing or was increasing from 43.7% to 47.8% of our turnover, which is what we have to work on during this year. The positive thing, however, is that, as I said before, we have the materials for 4 to 5 weeks available and also some vehicles which we can invoice to our clients, which are already finished. So if you would look on the cash conversion cycle, you’ll see the main problem we have is in inventories, where we go up from 148 to 178 days, and we will use that crisis to reduce, of course, that figure.

We also published our sustainability report today. We set some targets there last year. And this year, we can report on how we are doing there. You see that we have, unfortunately, some more working accidents. Actually, this is because 2 sites are now improving or have improved their reporting substantially. We still believe in our target of 30 accidents per 1 million working hours. We could improve by 9.5% regarding our women — employed women. And we also believe that we can fulfill the increase of 25% in our female workforce.

On the environmental side, we could improve the share of green electricity by 7%, and this is more — 9.4% more to go until 2021. We installed, and I come to that on the next slide, some photovoltaic systems, and we believe we can do that and fulfill that target until 2021.

On our product side, we introduced the aerial simulator in 2019, and we could have a saving of 100,000 square meters of plastic film in our helmet production. We see also some more projects on the product side to avoid waste and do some more in the simulation business.

What are the measures we take on the sustainability? We are supporting already the TCFD reporting or disclosures since 2019, and we will come up with the CFT reporting this year. This is our plan. I mentioned before, we installed 2 large photovoltaic systems in our 2 plants in Austria. And these were going live in January. So we are positive on this side. And we have also done a big safety campaign beginning of this year which should help us to reduce the accidents at work.

So coming to the outlook. We have still, I mentioned before, a very good situation. We have a huge order backlog with EUR 1.1 billion. Order intake was on the same level like in 2018. And this makes us confident to maneuver through that crisis.

I mentioned also before, we have some good hope to do again more in NOMA. You see the percentage is going a little bit down or was going a little bit down. On the other side, Asia Pacific was catching up and NISA was. So with our new COO, we especially want to focus on the U.S. market.

I also — I’ve got one slide for the liquidity to show you that in the crisis situation, this is also, of course, top of our agenda. Actually, you see how we are funded. We have a net debt position with EUR 342 million. And on the other side, you see that we are having lease liabilities, a bonded loan we did last year, then from the Austrian controlled bank a loan we use with EUR 36 million and other used credit lines. And we have a good headroom of unused credit lines which secure our liquidity. However, in this situation, we are setting also further measures, as planned, on the liquidity side.

So in a nutshell, speaking about the outlook, we see actually the global firefighting industry started well in 2020. We see the markets North America and Asia as well as the Middle East with some strong demand. And the European fire markets also reached a high level in 2019.

The stronger global spread of the crisis — of the COVID crisis has, of course, considerably risks in the fields of the industry demand, in the supply chains and in the production capacity. And this is why a serious estimate of the extent of these uncertainties is not possible yet. And this is, I think, the common picture we see also in all the analysis we see on the market. For this stage, for us at Rosenbauer, the health and safety of our employees and of the company, of course, is something we put first.

That is also the reason why guidance at this moment would be too early from our point of view. And — but and I mentioned that already with that high order level of EUR 1.1 billion and with no cancellations up to here, customers coming from the mostly public sector, so we did also a stress test on our accounts receivable, we see that these clients are reliable payers, and we see us very well prepared for that crisis.

The measures adopted ensure, of course, the excellent operational responsiveness and secure the liquidity. This is in our focus. And yes, last but not least, this is also something which is important for us that we are part of the critical security infrastructure, so we want to keep operations up and running wherever that is possible.

So this was my part, and I am now waiting for your questions, please.

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Questions and Answers

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Operator [1]

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(Operator Instructions) First question is from the line of Volker Bosse from Baader Bank. Mr. Bosse, can you take your phone off of hold, please, off of mute?

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

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I think I’m better now.

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

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Working.

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Volker Bosse, Baader-Helvea Equity Research – Co-Head of Equity Research [4]

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Mr. Wolf, thanks for the — all the provided detailed information yet. I have 3 questions. First, I would come to the INTERSCHUTZ delayed to 2021. What does it mean in regards to extra costs in 2020 now to be prepared here? I mean you had already costs in 2019. Now with the delay, what does that mean on your cost side? And also on the order intake side, it’s — I think that is a main part of acquiring new orders, this global leading trade fair in Hanover?

Second question is on risk of order cancellation. Good to hear that no order cancellation occurred yet. So what is your — how is your — what is your experience from the last crisis, for example, in 2008, 2009 in regards to order cancellation?

And third question would be on net debt, free cash flow. I mean you said big payments and order deliveries were made in or achieved in January and February. So would you say that net debt, free cash flow would be in the normal range, whatever normal means, in the beginning of the year? So it’s a bit of exhausted level at end of fiscal year ’19. And question would be, how do you plan your CapEx for 2020? And in free cash flow guidance, you did not provide a guidance, but in a normal scenario and flat free cash flow year-over-year, is that a target? Or how you look at that?

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Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [5]

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Thank you, Mr. Bosse, for the questions. So first question regarding INTERSCHUTZ, we see actually no extra cost because of the cancellation in 2020. We had already some costs for the preparation in 2019. So we will have some savings there. Not savings because we did not expend the money so far, but we will have no, for example — of course, we will have less travel costs, and we will also be able to delay the cost for the exhibition itself to the year 2021.

On the order intake side, we — I don’t expect a material effect from the INTERSCHUTZ or from the not taking place of the INTERSCHUTZ, the cancellation of the INTERSCHUTZ. But of course, there can be delays, which — in the public procurement, which we don’t see up to here. But we expect that to take place in 2021, maybe when governments still have other priorities than spending the money for our equipment. So this could affect our top line figure in 2021 and 2022. But this also depends very much on how long this crisis will go on. And it depends also very much on the different countries and how these are affected by this crisis. So that’s why it’s very difficult to say now, but we expect an effect in the years 2021 and 2022.

Sure. Speaking about order cancellations and the experience we had in past years. So we really expect no cancellations or cancellations coming from industry clients and maybe also the airport clients, which make the minority of our clients. So from our governmental client, and we did not see any cancellations up to here. In the crisis 2008 and 2009, this was the same. So we saw very few cancellations of orders because our equipment is seen like a machine. And if you need to do the investment, you do it because the old equipment is not any longer to be used. And then you need the fire vehicle and you need the equipment. So we don’t see these cancellations coming up.

Regarding net debt and free cash flow, of course, how do I see it for the first quarter? We did also a lot, as we do always, we have factoring at the end of the year. So especially in December, we had a lot of shipments. This was a bit of special in 2019 that really in December, in the very last month, the numbers were going up, so we could say EUR 70 million of accounts receivable. And therefore — and we were still very well producing in the first quarter. So I see no big improvement in the first quarter. However, as I said before, now we are delaying also procurement because we will go into the company holiday earlier. So I expect some improvements for the half year figure. And — but as I said, free cash flow was negative by EUR 50 million in the year 2019, and this is also something we are — we will monitor very closely this year, even in this — or especially also in this critical situation we see the market now.

For the CapEx 2020, we didn’t give a guidance, that’s right. But actually, we didn’t do that because we are now prioritizing the CapEx for 2020 because, of course, we do want to reduce it from the original planned figure, and we are still not at the point where we can say, “Okay, this is what we are going for.” Certain things we want to continue. For example, the implementation of our SAP project. We said this is a good time to continue with that. So we will still invest in that, but we will definitely further reduce our CapEx compared to the last year 2019, which was already on the low level. And yes, the free cash flow guidance, I said before, I would see an improvement in the half year.

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Operator [6]

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Next question is from the line of Markus Remis from RCB.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [7]

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I’d like to ask them one by one. Firstly, regarding the current kind of takeoff of pattern and also the kind of inspections which the clients have to do before they finally take up the product. I mean to which extent are travel restrictions a disturbing factor? Can you still invoice the product in a normal way? Or is that something which is delaying the whole shipment and invoicing process?

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

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Yes, so there is an acceptance process, is at the moment, not in a normal way, taking place not in a normal way. But there is a lot of clients, and we are doing that, of course, one by one. We’ll say, okay, you can ship the vehicle without acceptance. So we are sometimes also doing the acceptance now on a virtual basis. So actually, with a camera, we are going around the vehicle or some clients ask us to take pictures of every point of their specification list on which then they can accept from the pictures actually.

And there is also some clients, for example, in Germany, who will say, okay, you can actually ship the vehicle and — or you can actually have a 90% down payment invoice, so which will lead to the fact that we cannot show the turnover, but our down payments should go up dramatically. This is what the German clients are doing at the moment. So it’s very different from country to country. But thankfully, we don’t see too many problems. In some cases, we also have our local partners who do the handover. For example, in China, we can do shipments to China which one would maybe not expect at the first glance. So at the moment, no breakers here or no disruptions here, as we called it on the slide before.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [9]

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Okay. Sure. And how about the tender pipeline? I mean are you seeing delays because authorities now have other issues than to focus on processing tenders (inaudible)?

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

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So actually, the order intake in the first month was quite good, yes. So we see that some of the clients are a bit delayed with the tender processes, say, 1 month or so. But we believe that they will finish what they have already approved in the budget. So also the governmental operatives are working from — doing telework, in most cases, and the tender processes are not stopped at this moment.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [11]

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Okay. Can I ask you regarding the Middle East? You seem to be quite optimistic on the demand in that region, so I think, world-class and infrastructure projects. But I mean how does the low oil price fit into that picture? I recall on that the last time the oil price collapsed, this was also going hand-in-hand with the demand decline. Is that something you expect? Or is that other factors simply overcompensating?

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

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Yes. Now I expect that to take place, as I said before, a little bit later. The orders we have in hand now, I still don’t expect that they don’t — they get canceled. Yes, I mean, of course, there is a risk, but I don’t — or we don’t see that at the moment. And — but I expect the budgets for the year 2021 to be lower if that oil price does not improve dramatically quickly, which nobody knows, yes. But I expect that to take place then actually in the order intake this year, but not in the turnover figure this year.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [13]

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Sure. Okay. Okay. And can I ask you regarding the dividend? The Austrian government just hosted a press conference saying that the companies that applied for state aid will not be entitled to pay out dividends. How do you feel about that? It’s — apparently, you’re using state aid. If short-term work is kind of considered state aid, but I would guess so. Any thoughts on this from the government?

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

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Yes. I mean it’s more or less then — there’s no thoughts. That’s because this information is totally new. But yes, we will review what they will come up with. From my point of view, the state aid, we did not receive any up to here. And I think most of companies did not. And actually, the situation is that company is not profiting from short work, which is maybe the thing which is discussed here in Austria at the moment. Because actually, the employees are profiting from that, yes. If I have, for example, 50% short-time work, then I have to pay the 50% of my employee, obviously and of course, yes. So I’m interested in the discussion or if there is a discussion, then we, of course, yes, we will consider the measures taken here now in the next weeks. I believe our dividend proposal is a modest one. And this is, of course, something — I think it’s a fair proposal for all stakeholders of the company.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [15]

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And apart from short time work, do you plan to make use of any tax moratoria? Any of these measures?

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

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No, we can’t do that because I still don’t believe that we will — also we cannot delay our tax payments, if you’re referring to that, because, actually, we are — we are not having a crucial liquidity situation, so that is anyhow impossible for us. We can, however, reduce our income tax down payments, which we have to do on a quarterly basis because actually profit will be lower this year. I think this is not a governmental aid. This is just the fact, yes? And what we are seeing is that the Austrian Control Bank is offering some funds. This can be something we use, we’re evaluating that. And the short work is not planned because we have to give our people some guidance, but we also will use that on the — really in a very limited manner, as limited as possible. So we don’t — I don’t see the situation like in other companies that we will go to a full stop of the production in this time period, yes.

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Markus Remis, Raiffeisen CENTROBANK AG, Research Division – Financial Analyst [17]

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Yes. Okay. Final question regarding the net debt development. I mean the — now at EUR 340 million of net debt, that’s EUR 150 million more than your current market cap. I mean how do you plan to reduce that? It’s been going up year-by-year now also because of IFRS 16 mechanically. But what’s the level where you or the management start getting nervous and where you kind of sacrifice growth for cash conversion? And related to that, if you could remind us of any debt covenants you have.

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

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So actually, we have covenants for our bonded loan and this also to be seen in our annual report of 20% equity ratio. That’s the first thing. But — so I’m nervous because I don’t like it to be that high, yes, that’s clear. We are also committed to improve that figure. As I said before, the main reason was I mean, if you deduct the EUR 40 million, which is, I believe, fair because this is on the lease liabilities, then you are at EUR 300 million. The main reason for that was that we had some delays in the end of this year, which is again a result of IFRS 15. Please don’t forget that, yes? We have a hard cut in terms of cut over with IFRS 15. And that’s also why we saw here an increase.

We can’t give you the corrected figure anymore because we are not doing double bookkeeping. But actually, there is also an effect from IFRS 15 in that figure. However, I mentioned before, we are doing good on the buyer side on the down payment. So our measures were actually — they are showing effect on that end. On the accounts receivable, we were on a stable level, but still there is room for improvement, I fully agree. But the main focus is on the inventories. And yes, the crisis can help us because we can now use what we have on inventories and produce that. But we have to improve the work — the throughput times, and that is the main key for that.

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Operator [19]

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(Operator Instructions) The next question is from the line of Olivier Calvet from Kepler Cheuvreux.

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Olivier Calvet, Kepler Cheuvreux, Research Division – Equity Research Analyst [20]

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Yes. Can you hear me?

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Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [21]

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Yes, Olivier.

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Olivier Calvet, Kepler Cheuvreux, Research Division – Equity Research Analyst [22]

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Okay. Cool. Most of my questions have been answered, to be honest, but I just wanted to go back to the implementation of your new SAP ERP system. First of all, are there any sort of delays that we could see there or — yes, first question will be this, yes, sure.

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Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [23]

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Yes. So I was — we were not 100% sure how we can continue only virtually in this project because, actually, we are following the government’s regulations in Austria, we sent everybody to telework since 2 weeks. But we saw in the first workshops taking place that this is working very positively. And just yesterday, we had a steering committee for the project meeting and we saw that we can continue. And this was the common picture of all involved key users and global process owners that we can continue in a virtual project.

And therefore, we see no delays in the overall project. However, we had a short delay because today — or actually, on the first of April, we should have had a go live in Switzerland and Italy and France for our finance module, which we already have implemented mid of last year, and this was delayed because of the corona crisis. Because for the go live, you need some hypercare phase, and that was not making sense to do that now. But overall, we don’t see delays at this stage.

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Olivier Calvet, Kepler Cheuvreux, Research Division – Equity Research Analyst [24]

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Okay. But can you remind us what the target is for the entire company to be — to have switched to SAP?

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Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [25]

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Yes, of course. Actually, we are at the moment in the blueprint phase. So we have switched 11 companies already to finance module from SAP S/4 HANA. 11 companies have switched already. Three will follow after the Corona crisis, as I said, Italy, France and Switzerland. And what, the blueprint phase will be then finished in September, October, I believe. That was — yes, this was the plan. And then we will also be able to say when will which company go live exactly because that will be not, as it is called, a one time for everybody, a big-bang approach, but that will be that we start with our sales and service entities, entity per entity and go live one after the other. The whole process will take us for sure until 2023 to have every single company switched over to the new SAP system.

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Olivier Calvet, Kepler Cheuvreux, Research Division – Equity Research Analyst [26]

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Okay. Okay. Maybe just on risk of order cancellation. I just wanted to ask if you could sort of give us an indication if you have orders from your industry or airport customers that are canceled, what’s the margin impact of this?

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Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [27]

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Yes, the industry and the airport customers are in the field or the vehicles on a high margin. However, as I said before, we are selling 2 — 200 to 250 airport trucks per year. That’s — and our industry clients, that makes up for, I would say, yes, 5%, 7% of our vehicle sales. So it’s not the majority of our vehicles anyhow, and we could then fill that up with other orders, thanks to our good order book. So we could shift within the order backlog for this year. There would not be a big impact.

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Olivier Calvet, Kepler Cheuvreux, Research Division – Equity Research Analyst [28]

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Okay. Okay. And then just on the down payments, can you remind us what the figure was last year? You said this year, it was 13%.

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Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [29]

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Yes, the figure last year was 10%. And this year, it’s 13%. As I said before, expect that this can be increasing for this year because of the situation that not everywhere acceptance tests can be taken place. So clients might improve the down payments.

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Operator [30]

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There are no further questions at this time. And I would like to hand back to Sebastian Wolf for closing comments. Please go ahead.

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Sebastian Wolf, Rosenbauer International AG – CFO & Member of Executive Board [31]

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Thank you. Thank you, Stuart, and thank you, everybody, for taking place — participating in the call today. If you have further questions, don’t hesitate to contact Tiemon Kiesenhofer and myself. And as always, you will find the presentations in the presentation also under our web page in the Investor Relations section. Thank you, and stay healthy and well to everybody. Speak to you soon. Bye-bye, and have a nice weekend.