Wim Pelsma: Welcome, people joining our webcast. The agenda for today is that we will go through the full year numbers of 2020 and, of course, also go through the operational developments and also the financial developments and the outlook for the year. And, of course, we hope that we have a lot of questions and that we can give the answers. Aalberts, I think, this is a very important phrase that you will find Aalberts where technology matters and real progress can be made, humanly, environmentally and financially. More and more, you see that we are there where we have a uniqueness and where we have a niche technology to drive.

When you look to the essence of Aalberts, you see mission-critical technologies for groundbreaking industries and everyday life, where good is never good enough. Greatness is made of shared knowledge. Our way of value creation, you can see here. We have mission-critical technologies. Good is never good enough.

Greatness is made of shared knowledge. I cannot stress how important it is. Technology exchange, innovation speed, fast learning and adoption adaptation, very important. Improve our EBITA margin continuously. High entry barriers, pricing power, high added-value margins, sustainable, profitable growth.

This is a combination how we create shareholder value. Our playbook, the Aalberts playbook, relentless pursuit of excellence. Also, in 2020, this was a very important point because continuously improving your position, going for competitive advantage, driving operational leverage and excellence, increasing your margin and your margin expansion is a thing we are continuously doing. It drives our cash flow, which we also saw in 2020, and we keep on improving our portfolio all the time. This leads when you continue that to compounding returns.

We call it the relentless pursuit of excellence. It creates continuously long-term shareholder value. By doing this, already for many years, we have created a track record, now almost for 45 years of sustainable profitable growth. So you can see that this is even when you look back from 2020, which was a very special year that, over this time frame, it's a proven, sustainable business model, where we create continuously for all our stakeholders, but also the shareholder value. When we look to the last 10 years in our value creation, you can see that the earnings per share went up from €1.10 to €1.81.

So even when you look back 10 years, and you take in mind this special year, that we created a lot of value also in these past 10 years. The dividend, we will come back to that, but also there, we see, compared, of course, to '19, where we paid out the complete dividend as we promised, we see there a decrease of 25% in 2020. But also when you look back over the last 10 years, we see an increase. Our long term shareholder base has even grown in this last period from more than 50% to more than 55% for holdings more than 3%. That gives us also a trust that we are on the right track and that people have trust in us, a proven, sustainable business model.

Most important, and I can't stress enough, is that our key strength is our mission-critical people. The Aalberts way, how we call it, winning with people. So being an entrepreneur, taking ownership, go for excellence, share and learn, act with integrity. I cannot tell you how important it is that also in the year, we have now and behind us, the last 12 months, that especially also, we keep the entrepreneurial spirit in our group. The local decisions, which were made, going for the last ultimate goal, go for excellence and sharing and learning a lot of things also when you are confronted with a pandemic.

You try to learn from each other, how people treat their processes and how we also keep our people safe. It was very important also, the last 12 months. So greatness is made of shared knowledge, a unique advantage. The Aalberts way, winning with people is more important than ever. Our strategy and objectives are not changed.

We got also questions during the last 12 months about, yes, do we still reach our strategic objectives, what we presented in 2019. Yes, we are -- we always said that we will not let go these objectives because we will have still the aim to realize them. So still, we are aiming for an EBIT margin of more than 14%, a return on capital of more than 18%, a cash flow conversion of more than 70% and a leverage ratio, which is below 2.5 and, of course, a solvability higher than 40%, driven again by our entrepreneurship and a relentless pursuit of Excellence. Also, this year, and also the last 12 months, and also in 2020 and before, but also in the future, we will see how important innovation is for our company. It drives our organic revenue growth, our pragmatic culture and actually, the decisiveness to change all the time to improve.

The lean structure, how we call it, keeps us ahead of the game also in -- when you have new challenges to face. You see our innovation rate climbing. We see outcome rate climbing. That means we're doing more business with bigger companies all over the world. It's part of our strategy.

Our innovation rate made really a big jump the last 14 months. Important is also that we have integrated our sustainability inside our strategy. We explained that in 2019 during our Capital Markets Day, how we want to do that. And we get more and more traction with that. So what you see here in this slide is that we have a megatrends, which are shaping our future like rapid urbanization, like climate change, resource scarcity, Internet of Things, that drives also certain trends rapidly like globalization and co-development, like connectivity and integration of systems in a solution.

We said that already two, three, four years ago, and we see more and more coming. What we have done, we align the niche technologies to the end markets in such a way that we also have create a big sustainable impacts. And now, we are so far -- that 65% of our revenue is already linked to the Sustainable Development Goals, which we embrace and which have been agreed in Paris. So we achieved unique market positions with sustainable impact. For us, very important, that we take our responsibility, but also that we make impact and we are committed to do that, that it's part of our business model that is pretty unique.

Operational in 2020. Aalberts highlights. Of course, we also faced the pandemic. We are very fortunate that we only faced a limited number of COVID-19 infections and that we could continue the operations in a safe way, which was not easy in the beginning. It was very special, especially when you look to March, April last year, when we really saw -- yes, a big threat coming.

We didn't know what was coming. But I think our people did an excellent job to protect our factories and our people, but also to keep on servicing our customers. Our revenue declined organically with 7%, and we ended up with a revenue of €2.61 billion. Very positive is that our order book was growing, especially also in the second half. And at the year-end, we ended with 9.3% higher than last year.

We will come back to that in our -- the explanation of the operational developments for the niche technologies. Our EBIT amounted to €283 million. Of course, that's before our strategic restructuring costs, which we did to accelerate our strategy. And as a percentage, this was 10.8%. Our net profit amounted to €200 million; per share, €1.81, and we had a very strong free cash flow.

It was €339 million, a record. Our net debt before IFRS 16 reduced with 24% to €444 million. We guided to whole year that we are well on track to do a reduction of 15% to 16% because it was a focus point of ours, because we had to protect our company, especially in quarter two and -- yes, I think, ending up with 24% reduction says something about the improvement we made during the year. Very important also, and that is thanks to the strength of the -- financial strength of the Company, we continued our investments and innovations. Our capital expenditure was still almost €100 million.

So we postponed some things, some buildings, some capacity expenses where we thought it doesn't make sense to do it now. But almost everything kept on going. We didn't stop things. And actually, when September came and we saw, again, a better situation, we increased our capital expenditure again going in towards 2021. We also decided in April, and very quickly already, that we should accelerate our strategy because we presented the strategy in December and we were aiming that to do that over a period of three years, but we said we're going to accelerate that action plan, which we made and presented in December.

So we took a one-off full year strategic restructuring cost of €51 million, where we aim for an annual benefit of approximately €50 million. And we designed a lot of projects in all segments and all our business teams. I must say, this was a great job of all the teams, how they did that but also, I think the strength and the speed, how we did this, when we can now look back almost 10 months, that was done very well. And it will bring us much quicker in a better, even stronger position. So Aalberts accelerate strategy and continuous investments and innovations even after, during this year.

Operational developments are, again, as we said, organic revenue decline amounted to 7.0%. The second quarter, we were impacted by COVID-19. We took immediately actions to protect our people, to also protect our processes. But we were also faced with temporary customer shutdowns in different countries. So that was, yes, a situation we never experienced like that.

We also immediately reacted. And fortunately, we could see that end of May and certain customers already beginning of May, opened again their facilities, and we could ship again. So we saw gradually a recovery from end of May step by step. And the second half, the business overall recovered in a different speed, but it all recovered. Year-ended with a strong order book, 9.3% higher than last year.

Focus was on cash management, cost optimizations and innovations, as already said. And also important to mention is that we kept on investing in R&D, in future technologies, growing product lines, and we didn't stop that, and some building and capacity expansions we postponed. When we look to the end markets and the regions, we have four end markets where we focus on. Eco-friendly buildings, they recovered well from a level, lower level in the second quarter. The reason for this actually quick recovery was that we saw continuous traction of our innovations, especially certain connection technology products, which kept on growing.

We reopened the distribution channels, were reopened of our customers, so we could ship again. And we saw, especially in quarter three and also quarter four, an increase in customer demand. There was more spending. And, of course, the inventory level, which was reduced during quarter two, was again increased in quarter three. But we saw also that we got more order intake due to more customer demand because, in our opinion, there's more money spent in this end market.

And at the end of the year, our order book was increased to a record level in this end market. Semicon efficiency performed very well. Strong growth, a lot of new co-developments and projects also initiated, and we ended the year with a record order book also. Sustainable transportation. That means, that's also aerospace.

It is also automotive. It is marine. All these kind of transportation end markets. We faced difficult circumstances, especially in quarter two when customer shutdowns, in combination with heavy, heavily inventory reduction of our customers, yes, created a difficult situation. After reopening of the customer locations, we saw a gradually recovery, especially in the beginning of our fluid control products, which we have to manufacture.

And also, in surface technology, our precision manufacturing, our precision technology activities saw a recovery and, which was followed by our surface technologies because you first produce a part before you can treat it. And that kept on going. So in the second half, it further recovered due to increased demand, but also because the supply chain was again filled and the inventory level of our customers was further built up. Also, there, we ended in a pretty good situation. Industrial niches, activities increased gradually for the quarter four.

Also, there, of course, a difficult situation in quarter two. But there, you saw that the recovery was a little bit later, in quarter four, except for our beverage dispense activities where we really, the moment there were lockdowns announced, it resulted in a very low revenue. But fortunately, it's a small part of our business, but it had an effect, and a difficult market situation. So in summary, eco-friendly buildings and semicon efficiency, record order book at year-end, sustainable transportation, and industrial niches gradually recovered in the second half of '20. How's our overview of end markets and regions? We presented this also earlier.

Now, what we see here, semicon efficiency end markets had a strong growth, and we see also an increased revenue percentage of this end market. Operational excellence and portfolio optimization. As we announced, we, of course, had an action plan in our Capital Markets Day. We decided, as already said in April, to accelerate that action plan. So what did we do? We further focused, clustered and simplified the organization; we reduced overheads in all segments, we went through all the overheads and all the structure through the segments; we reduced the net working capital structurally; and we had many projects implemented to optimize our operations, many projects in all segments.

So we did a lot of things. Combined with managing this pandemic, we initiated all these projects, and that resulted and led to one-off full year strategic restructuring cost of €51 million, where we see a benefit of approximately €50 million, partly '20, fully '21. We went ongoing with our divestment program, which we also presented during our Capital Markets Day. We did some divestments, small divestments, but I think very, it was very difficult things to do, which were very important to do. And we still stick to the divestment program, which we have also announced.

So acceleration of the action plan, let's say, not in three years, we hope to do it now in one and one and half years to evolve in a better and stronger Aalberts. Organic growth, innovation and capital allocation, we didn't stop. We continued. We overcame the situation very quickly and we went on what we are good at, innovating, organic growth, conquering markets. So in piping systems, we continued sales and capacity expansion of connection technology.

We even introduced additional innovations. Valve technology, we introduced some very nice new patented valve lines, a full floor line and a balancing valve line, which we introduced in the months of April and even in quarter two. And we started more and more, we see success with the digital piping design services with a dedicated team, where we engineer and optimized integrated piping system because we have all the portfolio, but we are also now more and more able to show that to the customer, even design it for the customer. And the number of projects, combined with our Aalberts name, is strongly increasing. We aligned the organization further, utilizing our combined strength, that means we look to the branding, we look to a unified supply chain, which we also consolidated and optimized in North America, which is -- yes, I think, in a very good shape now.

In Europe, we are busy to optimize further the new assembly and distribution centers because we are building in Netherlands and in Belgium. In the Netherlands, we are now integrating the warehouses from Europe. And in Belgium, we do the same, and probably that will be finished in the coming 12 months because we do it step by step. You can also see that on the reduction of working capital that showed good results. Hydronic flow control, something we mentioned, too, here.

Yes, we kept on pushing the newly launched product lines, increased innovation rate. We could also see here, not only in hydronic, but also especially here because we launched a lot of new products. And what is very nice to see is that we combined it more and more with digital services. So that means that you offer data to the customer where the customer can show the data and can read the data where we can improve his own heating and cooling system, and we combine that with our products, which we already delivered. It gives us also the opportunity, and that maybe most important for us, to gain more and more projects from the building owner, but also from the project developer because we combine actually the digital service with the products and the systems we already delivered, that gives us a unique position.

It's really going very fast because we also have delivered and sold these long-term contracts which sometimes go over 10 years and which give a continuous stream of revenue, but we also score the projects where we deliver, of course, our products. Digital marketing and R&D capacity is strengthened. We have now a very nice group of software engineers. We strengthened that with also digital marketing know-how from outside, yes, to bring ourselves further in thism also for us, very nice new world. Our strategy is aligned with the competence centers to a unified, focused organization, with less overhead.

So we also looked here to the overheads. We look to the different locations we had. And it was a complex process, but I think we are pretty well going forward here. Our new manufacturing distribution facility is in progress. That means we are building here in the Netherlands, where we combine, yes, the different warehouses in a new distribution facility and where we also expand our manufacturing facility of certain product lines, and we can also have an expansion of these lines because we have no capacity left in that area.

Our water supply and district energy activities performed well. Also, here, we launched two new lines, and one line is successful. We had to increase our capacity for this full flow product. Surface technologies. A big part of the strategic restructuring took place in surface technologies.

The last many years, we did a lot of acquisitions in this area. And we already had the plan to review the locations and to also look to the market trends, which we are facing. So we reviewed all the locations. We created actually the right technologies for the future. So we also stepped away from certain older technologies where we thought that doesn't have the future, looking to the market trends of electrification of vehicles, but also other areas where we think there are certain trends in the market.

And we optimized our geographical footprint based on this analyze. And that meant that we have closed, consolidate and also reduced a lot of locations. So that means that our aim is to come much better out of this, but that we are also strategically aligned to the future, like electrification of vehicles, like transfer of manufacturing locations of our customers, where you see a trend that, for example, combustion engine manufacturing plants move more to Eastern Europe. So we follow them partly, but also that new technologies for electrification or other technologies come in the same area like in Germany or France. So you have to adapt your portfolio to that.

So I think we made there a very good and big step, very well-managed, the last months, to also see the cost reductions and portfolio improvements. Again, electrification of vehicles gives us a lot of opportunities for development of processes for new parts, where you see all kind of new specifications. They are looking for light weighting, lesser weight in vehicles. Particle-free because otherwise, yes, you get electricity in your car. We see more heating coming in a car.

So that has to be cooled. Certain coatings can help with that. We see noise reduction as a very important point because when you have no noise of a combustion engine, you hear the wheels, so you have to reduce the noise of your chassis. Therefore, they use coatings. Strengthening of new materials, strengthening of lighter materials, fantastic business with a great future.

Our worldwide footprint, and I think we have there a great position worldwide because we are here really a market leader in this field in these technologies, which we serve. That's really an advantage towards the future because the developments which are taking place in all kind of machine builds or electrification or commercial vehicles, they standardize more and more the parts. That means they want to produce or coat the parts on the same way on different regions in the world, and we are perfectly positioned for that. Fluid control, difficult year, but we continued our innovation road map. We took advantage of new systems which we launched, new innovations for industrial niches, and also upgrades for sustainable transportation, one of the examples this year on the picture.

It was a new upgrade for a CNG regulator, which we brought in the market. Our innovation road maps within fluid control are mostly focused on regulators, valves, measuring systems to reduce the use of fuel in vehicles, in means of transport, but also to drive the conversion to hydrogen, to LNG, to CNG, that all has to be regulated. You need valves for that, but you also need measuring systems to reduce the amount of fuel you use. We have started also to develop hydrogen fuel cell applications, where we see a big market in the future. You see more and more OEMs looking for applications here where they need partners.

Now we have that knowledge. So we want to be in these kind of development projects. So we have there some nice starting points. And even when beverage dispense had a difficult year due to the worldwide lockdowns, we were able to launch two new systems. One, where we launched a dispensing system for disinfection.

It was based on our beer dispensing, a very nice innovation, which we launched. And we launched a new design and a complete new system for our bar gun soft drinks, which we will take a nice share in the future, is our opinion. Advanced mechatronics, excellent year. Realized strong growth. In the beginning, we had difficulties to deliver our systems and our goods because we had to take here, also, preventive measures regarding the pandemic.

But when we overcame that, I think we could deliver very well to our customers. And so that deserves a compliment for that whole organization. Many new co-development programs were started, especially in our high-purity fluid systems, where we even strongly expanded our engineering capacity due to a lot of co-development projects, which were initiated during the year, for the coming years. Our vibration isolation activity, there, we will expand our facility further to facilitate the strong growth. So we will expand our building there and our equipment, which we need.

And within our ultra precision frames, where we are a real specialist, which you will not find almost all of the world, our specialism there, we have already a big order book, and we are optimizing our operations to deliver that order book and also implementing further all the capacity expansions, which we did the last years. Also, here, we create a unique position of specialized technologies, combined with co-development projects with our key accounts, in combination with our investment power that is really unique, and we become more and more unique in this world and this semicon efficiency end market where we are active here is booming. So we will also take advantage of that. And now, I would like to give the word to my colleague about financial development.

Arno Monincx: Thank you, Wim.

And also, from my side, welcome to the webcast. Special year. We made revenue last year of €2.841 billion. And due to the full year effect of acquisitions that we made in 2019, we have a positive effect in this year of €18.5 million. The negative effect of divestments that we also made in 2019 was a negative impact of €26.1 million.

And that ends up then to the total organic revenue decline of €191,400,000 to come to the €2.610 billion for 2020. The decline of 7% is to be split up in the first half year for 11.1%, as you may know and in the second half year, the decline was 2.5%. Then, for the EBITA bridge. Coming from the €.6 million last year, we had the same positive effect of the acquisition that we made, the full year positive effect of acquisitions that we made in 2019 of €2.9 million. We had a negative effect of our divestments that we made in 2019, in 2020, €1.4 million.

And then we had a negative currency EBITA effect of €3.2 million, the same currencies, as I mentioned earlier, and that then totals up to the organic decline of EBITA of €78.4 million, which is equal to 10.8% at €282.5 million, is equal to 10.8% full year versus the 12.8% last year. And again, also, there, we saw an improvement in the second half with 12.2% of EBITA, and this is EBITA before our strategic restructuring cost. Then, the consolidated income statement, where you also see some stats for the SRC. For the EBITDA impact, it was €43.3 million because, of course, there was an €8 million depreciation effect in our strategic restructuring costs. So that is also calculated there.

Then the depreciations, €140.1 million leaves, comes to the EBITA of €282.5 million. The net finance expenses, costs, and then the income tax expenses where we also calculated a 25% tax effect of the total strategic restructuring costs of €51.3 million, and that comes then to the total net profit before amortization of €199.6 million versus the €267 million last year. And that gives an EPS of €1.81 versus €2.42 last year. The balance sheet, as said, we had a lot of focus on our cash management and also the improvement, the structural improvement of working capital, and that came out, let's say, all these actions came also to a lower working capital this year. And that also, at the end, improves our cash and, therefore, reduced our net debt.

So the net debt reduction, €444 million versus €588 million last year, 24% decline, which was even more than we have guided throughout the year. The leverage ratio, at the end, improved to 1.1 from 1.3 last year. And the net working capital, as said, also decreased with 90%, finishing at €399 million end of 2020. And that improved the days net working capital with six days. Despite the lower revenue, we could improve the days working capital with six days to 55 days, and that totals then the solvability at the end to more than 55%, and a return on capital employed before IFRS 16 of 12.5% versus 15.1% last year.

And I think, especially the leverage ratio improvement is showing the strong balance sheet that Aalberts has at this moment. The condensed cash flow statement, where you see, of course, the lower EBITDA, compensated by the improvement of working capital. That's where we make the biggest compensation of our lower profits in the cash that leads to a cash flow from operations of €11.4 million lower than last year. Then, we also delayed, postponed some investments, and this is the cash-out effect of that. So the cash-out effect of our CapEx was €35 million lower than last year.

And that helps, of course, also to come up to a better free cash flow full year of almost €27 million better than last year. And then, you see also the other costs around. And we also see the higher dividend payment in 2020, where we paid out, of course, the dividend of 2019 of €88.5 million. And that also showed, yes, shows our consistency what we promise we make, despite difficult market circumstances. The segment reporting, it's, we made an adjustment for the 2019 figures because of some businesses that changed.

There was one business going from the industrial technology to the climate technology segment. And there's one business that went from the installation technology to the climate technology business. So therefore, we have restated 2019 numbers to make it fully comparable with each other. And there, you see that the revenue impact in installation technology was 5% with a good recovery in the second half. Material technology was impacted 14%, climate technology with 8% and industrial technology with 5%.

In the capital expenditure, you also see that we reduced, but we finished at the end with €95 million of CapEx, capital expenditure, versus €148 million last year. The EBITA and EBITA margin. There, you see, of course, that the businesses with high added values are impacted also more heavily, like material technology and also industrial technology. And in installation technology, it is, and climate technology, it's, they kept the level better. But at the end, installation technology reduced the EBIT percentage with 1.3%.

Material technology still made 8.5% EBITA, which leads to a reduction of 4.1%. Climate technology performed also strong. They kept the level of EBITA percentage on the same level. And then the industrial technology business, as already said by my colleague, also impacted by dispense. But also, in other market segments, that was reduced 4.3%.

It was a solid and resilient performance. Then a slide about the dividends, showing you the dividends since 2012 until 2020 where you see that -- yes, the sustainable profitable growth also resulted, at the end, in a sustainable profitable growth development of our dividend payouts. And also, as I said earlier, the €0.80 of 2019 was a high dividend that we decided to in our general meeting. And, at the end, we paid it out in July 2020 after a very difficult quarter, but we also knew that with the good measures that we took, that the cash at Aalberts was safe and good development and that we could do the debt. So we kept our promise.

And it's the same for our 2020 proposal. Of course, we proposed less dividends, but it was also less profit that we made last year. So the proposal is €0.60, consistent with our, let's say, policy.

Wim Pelsma: Yes. The outlook.

The outlook for, yes, let's say, the coming period. Yes. I think, yes, as already said, we are active, very busy with execution and further implementation of our strategic plans, which we presented in December 2019. And, of course, we still have to look how the effects and also how it continues with the pandemic, which is still at the moment, still there. I must say, in our facilities, we have very good preventive measures, and people know how to react on it.

So we keep on going there, but we still have to see how that works out. But we will drive forward our organic revenue growth plans. Innovations will be further pushed forward and, as I already said, we further ramped up our investments again in September, October last year because we have many, many good growth plans and so you will also see an increase of our capital expenditure to facilitate these initiatives. The second thing is the strategic restructuring projects are not done yet. We launched them in April last year, and even I think in surface technology already a little bit earlier.

So we will further pursue them to get the results out of it. I think that's very important for 2021 because we stick to the, yes, to the phrase that we have a benefit approximately of €50 million based on the restructuring costs of the €51 million. It was partly in '20 and fully in '21. And so we have to pursue that. It's a lot of work.

And we will further improve our portfolio. That means our divestment program, optimization of our products and technologies, yes, to realize our strategic objectives, which we presented in our strategic plan. Besides that, and that's, I think, important, we see also opportunities for further strengthening our market positions, not only organically, where we have a lot of focus, but also inorganically. And so also strengthening niche technology position with bolt-on acquisitions, we will absolutely continue and also have our attention also, especially when, yes, we have overcome for a big part, let's say, this pandemic and we see now the vaccine programs coming in so we will also look much more to this point. So yes, starting the year with a record order book in two of our niche technologies does not, yes, give us a bad feeling, I must say, but we have to be careful but we have to pursue our strategy, as we did with a fantastic group of people we have within Aalberts.

Operator: [Operator Instructions] Our first question this morning comes from the line of Luuk Van Beek from Degroof Petercam. Luuk

Van Beek: First, a couple of questions about the organic growth. If I calculate it correctly, then Q4 revenues were flat roughly, organically. Can you confirm this and talk a bit about how the early months of this year are shaping up? And also, you indicated a backlog increase of 9%. Should we take it as a rough indicator of the kind of recovery you could see this year? Or is it also partly a lengthening of the backlog?

Wim Pelsma: First of all, the organic growth.

Arno R. Monincx: Yes, the organic growth in the fourth quarter, as I understand, your question was, I can confirm that it was a small positive. Luuk

Van Beek: Okay.

Wim Pelsma: Now looking to the backlog. I didn't understand your question completely, but yes, the backlog, that means the order book is 9.3% higher, and that's mainly in our eco-friendly buildings activities and semicon, yes, where we really see higher demand.

So I must say, we have even difficulties to service everything. So it's not only a recovery out of the quarter two situation. It's also an increase of demand. Plus, in combination with our innovations, which we, of course, launched last year. Luuk

Van Beek: Yes.

My question there was, if we can see that as a rough indicator for the revenue increase in 2021?

Wim Pelsma: Yes. That's, of course, difficult to say because we are still living in a pandemic. I don't know how that works out, also, for the other segments but -- for the other end markets. But when I look to the building market, it looks pretty good. And also the semicon efficiency market, we have a lot of -- yes, a big order book and a lot of projects in the pipeline.

And we see the other end markets like sustainable transportation and also the industrial niches, we see recovering, where we think that industrial niches is recovering a little bit more in the second half of the year. It's more project-driven, so it will take a little bit longer. But also in our sustainable transportation, we see good developments, and that means also for surface technology. Luuk

Van Beek: Okay. That's clear.

And you reiterated the strategic targets, but didn't -- I didn't hear the organic growth target. Is 3% organic growth, at least, is that still a target for the full period on average? Or how should we read that target, because obviously, 2020 was an unexpected deviation from the original plans?

Wim Pelsma: Yes. Of course, we have faced this pandemic. We didn't know that, of course, in 2019. So -- but as we said, we have no reason at the moment to -- yes, that we do not realize the strategic objectives.

So let's see how that works out. Also, for the average organic revenue growth, which is where we said the average over that period is higher than 3%. So the answer is yes. Luuk

Van Beek: Okay. And then my final question for now is on the drop-through, which was 40% in 2020.

Obviously, that's higher when you have a sudden change in revenues. This year, we could see a recovery. Should we also expect a similar high -- so above the 25% drop-through with revenue recovery this year or maybe next year?

Wim Pelsma: Yes. It's, of course, different per technology, yes. But you should also take into account that we also reduced €71 million inventory, Luuk.

And when you reduce inventory in that amount, and that's, of course, especially in our piping systems activity, then you also lose absorption in your factory, which also affects your EBIT. So the moment, you're going to produce again, which we have to do -- yes, you also increase your absorption in your factory. So that will help. And in our activities, surface technologies, yes, I think there, we have a much higher drop-through than also in the other segments because, yes, you have a relative high breakeven point. So the moment you go down, yes, you have a higher drop-through going down, but you'll go higher drop-through going up.

But how that works out in the total, that's difficult to say. It depends, of course, also how the pandemic is evolving. But we will recover and we see it already.

Operator: Thank you very much. Our next question this morning comes from the line of Henk Veerman from Kempen & Co.

please go ahead.

Henk Veerman: Hi, good morning everyone. Congratulations with the solid results in a very volatile environment last year. My first question is on the gross margin, which is 61% in the second half of the year. Is that related to pricing because it's a bit lower than the usual, let's say, run rate? Or is it also related to the copper prices, which have increased significantly in the second half of last year? And then my follow-up on that would be also on the copper prices.

So what do you see in the market since the start of this year? And have you implemented any sort of measures to counter this sort of very high inflation in copper prices? And will this impact profitability this year?

Arno Monincx: Let's say, your first question, we can split in, I think, in a few parts. First -- the first reason of the lower added value in the second half is, of course, the different mix that we have than last year, where we still have the high added-value business impacted more heavily on the top line than the, let's say, the installation and climate technology businesses. The second one is what Wim already said is the inventory reduction. So also, there, we continue to structurally improve our inventories. And it also means that you produce relatively less than what you did last year.

So these are the main reasons for the lower added value in the second half. Regarding the copper prices, of course, they are going up quite heavily, and we take also our pricing actions for that. But as you also know, we are also covered for a couple of months ahead. So we always try to anticipate in the right way with our pricing instrument to keep the margins. But there is, of course, a challenge there to keep it in the right pace.

But again, yes, our portfolio enables us also to do that as we did many times in the past also.

Wim Pelsma: But maybe to make it clear, Henk, it didn't affect the second half because we were already covered for the raw materials. What we faced a little bit in the end of the year and beginning this year is also the, yes, we had to do, yes, also the shortages. So we had to do a lot of effort to get our raw materials, but that, it's under control. But as you know, we are very on top of pricing excellence.

So our, my and our aim is to take advantage of it. So we immediately increased our pricing, and we can do that because we have very strong positions, and we will push it through, as we always do, and try to take advantage of even the situation. And so it will not affect our margin. Of course, it's very important that you're on time. So we initiated these actions already last year, of course.

But I think we are on top of that, yes.

Henk Veerman: Got it. Interesting. The second question is on the cash flow statement. I think in the first half of the year, the impact from, let's say, any COVID relief measures, the governmental plans was very limited.

Was this also the case in the second half? Or do you have any, let's say, did you book any tax deferrals in the second half of the year [Technical Difficulty] cash generation?

Arno Monincx: Let's say, we did book about half of the support in the second half versus the first half. So we only took, let's say, some short-time reduction programs in some countries, not in the Netherlands, not in the U.S., but in some other countries, we did because these programs are also running. We're already running also in previous years. This is a normal procedure. So we continue doing that.

And that is, we booked less, about half of the support in the second half as in the first half.

Henk Veerman: Okay. So that's relatively small then. Third question is on the agenda for divestments. I mean, in the half year, you indicated that the market for divestments is not that interesting for you, also because you were busy restructuring a couple of these businesses to get a higher price eventually.

Now that the market, I guess, is improving quite rapidly, and you've sort of done the major part of the restructuring, is it, do you expect the divestments to be a strong focus point in 2021, so this year? And can you give maybe some color on what your plans are? Because I think so far, the color on, let's say, the activities and which segments, the color, like the divestments take place has been quite limited.

Wim Pelsma: Let me answer the question. It's two questions. Question one is, yes, it still has a lot of focus. So you're right, we were able to improve, yes, these, let's say, companies or clusters where we, which we want to divest in the last months.

I think we also said in December '19 that we had, we have really indicated where we want to divest. Of course, we also have still had some here and there, some question marks, which I think the question marks are now all solved. So we know exactly what to do. We also improved the companies, which we aim for. So I think the roughly number, which we gave that time, it was €300 million or even maybe going up to €350 million, but let's say €300 million.

We still aim for that. I think we did a small amount of small locations in 2020. But, and you're also right that it's now a very good timing to now do the bigger divestments. So we are, yes, we are very busy with a few projects to now execute that. The reason that we are a little bit vague also about the, yes, where we divest is also has to do with some confidentiality.

We don't want to, yes, let's say, we also are, have competitors in the market, but we also have our own people. So let's say the people who should be aware of it are aware of it inside Aalberts, but I don't want to say more about that. But it is what we said also in our Capital Markets Day. We look for, when we cannot create a position in the future where we can achieve growth or increase our profitability, then it's, it could be one of the criteria. Another criteria is it has low financial performance, and we are not able, in a certain time frame, to increase it.

And the third is it has no link with the group. And we have a few, still a few things where there's not a lot of link with the group. So, but let's say, we still have that program, and we will also execute it in the three years, as we said. It could be, and that has also to do with the strategic restructuring, that we may, in the end, close or consolidate a little bit more locations instead of selling them. But let's say that we will still be, yes, let's say, somewhere between the €250 million and €300 million which we have still on our radar and to be executed the coming, what is it, coming 22 months.

But the timing [Technical Difficulty] at the moment.

Henk Veerman: Interesting. Last question is on CapEx. I mean, this year, last year has been quite low, obviously, because you postponed most of the capacity expansions. So do we, can we expect, let's say, a ramp-up maybe to above the €140 million to €160 million run rate this year? Or will it still be within, let's say, the €140 million to €160 million for 2021?

Wim Pelsma: No, I think maybe to come to the €95 million CapEx and €105 million cash out, yes, I still think it's a big amount of money, which we pursued.

So what we postponed was maybe mainly some buildings, which we, yes, where we delayed a little bit the building. We could do that in good cooperation with our suppliers, and which we'll continue this year. So that means you get a delay effect of the cash out. So probably some cash out will increase through that. It could be, moving to my colleague, €20 million to €30 million, which we shift from '20 to '21 from that effect.

And yes, we have the same plans as we had before the pandemic. That means a lot of growth plans, which we will pursue. So you will see during the year, again, a further ramp-up of the CapEx and cash out. And I think it will be still in that ballpark, a number of between €140 million, €160 million. That is what I think because operationally, you also have it, yes, you have to manage it all, which is already a big job with these kind of amounts.

But it's shifting a little bit more in the time. So where we may be, first of all, said -- yes, you invest maybe in the years '20 and '21 mainly and then '22 could be a little bit lower. So now it could be that '21, '22 is still high, and it is in '23, a little bit lower. That's more how you should see it.

Operator: We now have a question from the line of Aurelio Calderon from Morgan Stanley.

Aurelio Tejedor: I have three. I'll take them one at a time, if I may, please. So first question is around your savings. If you could help us maybe understand the phasing of those €50 million, i.e., how much was already in 2020 and how much we should expect for 2021?

Arno Monincx: Let's say, that's about 20%.

Wim Pelsma: The savings.

Arno Monincx: The savings, yes. So the annual benefit of €50 million approximately is about 20% is in the book year of 2020.

Aurelio Tejedor: Okay. That's perfect. The second question is a little bit more in kind of your different trends that you saw on the different verticals within eco-friendly buildings because we've obviously seen very strong residential data coming out of the U.S.

and in Europe as well, but let's say, more nuance non-resi data. So I would be curious to know whether you -- I know that you're more skewed towards residential construction. And so I'd be curious to know how the different verticals have panned out through the year?

Wim Pelsma: That means within eco-friendly buildings, the residential commercial?

Aurelio Tejedor: Yes, yes, correct.

Wim Pelsma: Yes. First of all, maybe good to mention that 70% of our business roughly is renovation.

So also, what happens now, and that's really a driver of the business for the coming years, is the whole building efficiency that you have to go to energy efficiency in buildings, so it can be bigger residential apartment blocks or commercial houses, is also driving the business, so -- because it's also renovation. So let's says 70% is renovation, 30% is new build. Yes, of course, in Eastern Europe, for example, it can be a little bit different. And then when you come to residential, we are strong in residential in -- pretty strong in Europe. And we are not -- less strong in the U.S., where we have more commercial and a little bit industrial focus there.

And we are both strong in commercial in Europe. Now what we see is that, and you're right, in the residential arena, but it's also in the apartment blocks, let's say, the more -- yes, combined units of residential, you could say -- yes, there's a big demand. You see that people are more spending on their homes. So that means they changed their bathroom, changed their kitchen or whatever, and they changed their heating or cooling system or whatever, and that helps. That really stimulates our growth, and it will also go forward during this year.

The second thing is the whole trend of building efficiency is really taking shape. And besides that, we have a few new innovations, which we launched the last year, especially in the connection range, like our press connections where we have now all the different materials, which we launched in more and more countries, and we have our groove connections, yes, that will also drive the business in residential, but also commercial. So it's a combination of market effect, but also our own efforts, where we -- that's also why our order book is at a record level in that area.

Aurelio Tejedor: Yes. That's helpful.

And maybe one last question from my side. A little bit more kind of bigger picture. I think you mentioned that you are starting to carve your own niche within hydrogen fuel cells. Obviously, there's a big growth in market, and would be curious to know what your exposure is and where do you think it could get in, let's say, 5, 10 years' time?

Wim Pelsma: We are a big player and actually market leader in regulators for gas. So the shift from oil to gas, we are already a big player.

And we get now more and more questions from big OEMs, and that's already the last 12 months -- yes, to also look to solutions for regulation of hydrogen in their new, let's say -- yes, their new engines, their new fuel cells. So yes, that -- we are in discussion with them. We are making prototypes, but we know their business very well. We also have now very good context through additional strengthening of our management in our commercial vehicle area, so that means in the trucks and -- where you also see a trend to gas but also to hydrogen. And, of course -- so yes, that can be very interesting.

Of course, these kind of projects, they run sometimes two, three, four years. So -- but we have found there a nice niche. Besides that, we are very good at the gas side, LNG, CNG, but for regulation valves, we're also now aiming for hydrogen. Yes, how big that can be in the future, I don't know, but it's really -- we got a lot of questions in that field and -- also from German OEMs, French OEMs, and we want to expand that also to the commercial vehicle market, yes, to also their OEMs to -- and that drives our innovation road map. So it should be one of our pillars for the future, but it takes time to come there, of course.

Operator: Our next question comes from the line of Peter Olofsen from Capital Cheuvreux.

Peter Olofsen: I have a question on the network optimization. I recall from the Capital Markets Day in 2019 that you were looking to reduce the number of sites by more than 30. So could you give an indication where you stand today? And to what extent may you have to take additional cost for reducing that network? Or have you taken all necessary costs in 2020 already?

Wim Pelsma: Yes, I think it's a good question. We went -- from my head, we went from 156.

Our aim was to go to 122. When you look to our website, and we have updated that also end of the year, we are now at 133. So we did a big part. We are not there yet where we want to be. What we also, of course, see is that sometimes you can maybe better consolidate and not close.

So we are still in that process, but -- yes. And we are not completely ready yet with the strategic restructuring. So we still aim for an amount of closures and that -- at this case, it should be all in the €51 million. Of course, it can be that when you do additional acquisitions, you'll come to some little different insight that we still -- yes, maybe in the future, take some additional measures, but let's say, for the strategic restructuring program, which we aim for from 156 to the 122, there are, let's say, yes, almost all the costs are in this €51 million. But don't correct me when I'm wrong.

When we find new improvements in the coming years, certainly, we will not -- we will also do it. And -- but that's, I think, the most concrete answer. And hopefully, we can update you, let's say, the coming two years because we still have the aim to go there in three years, but we only have one year passed now. Don't forget that. We have now more than one year.

We are busy with this, but we accelerated it. But this 122 is still our aim to go for.

Peter Olofsen: Okay. That's clear. Then maybe on the change to the segments reporting.

Can you explain what kind of business did you move to the climate technology segment?

Arno Monincx: Let's say, we moved business that from the nature of it, we thought fit much better in the climate technology segment, also with the projects that they are running at this moment for the future with product development. So that's the reason that we did it, to bring it more in line. And that is also, yes, let's say, a learning, of course, through the years, which made us that conclusion. So that's -- so it's one business from installation technology and it's one business from industrial.

Wim Pelsma: Actually, what we did -- what we also did, Peter, we had -- we merged two business.

We combined two businesses. And one part was in climate technology and the other part was in installation technology. And we found out that these locations, yes, were actually in the same market. In this case, it was water and supply activities for underground applications. So we brought these two companies together.

And we decided to bring them all together within climate technology. So that, I think, is the main reason. So it's market-driven. And also -- yes, we see more and more future there also for, in this case, for hydrogen in buildings, but also district energy, so -- which is a focus point of ours. So that's why we brought it over.

So the district energy activities and the underground activities, underground application for water and gas, we brought inside climate technology, where we think it also belongs, so that really, the piping systems are fully in installation technology, which we also explained in our strategy presentation.

Peter Olofsen: Okay. And then my final question is on innovation. In your introduction, you mentioned that the innovation rate has clearly increased last year. Could you quantify that?

Wim Pelsma: No.

Yes, we follow that very clearly -- very, very closely, actually. So we -- as you maybe can remember, we were close to 10%, a little bit below 10% when we announced our Capital Markets Day and our aim is to go, our innovation rate bring from a small 10% to 20%. Now we measured already during the year that we are already halfway, almost. So we were at 14.5%, something like that. So that's not only for climate technology, but climate technology was a big driver in that, but it's also for the others.

And as you know, our innovation rate is -- yes, is defined as -- yes, the revenue, which we introduced, let's say, launched four years ago, which is then four years later as a percentage of the year, the running year, let's say, of the last 12 months and then the percentage of that. So it's launched four years ago, how much revenue we have gained in these four years, and that you divide by the last 12 months of the year where you are in and the percentage. So it's going really in the right direction. And innovation takes a lot of time. I've always said that.

And it's a struggle because you always think that next month you're going to launch, and then it takes another three months because it's technology. It's not, actually, I'm also happy that, that happens sometimes because otherwise, it would be very simple for competitors to copy us. But you see the rate climbing up. And it's not only in climate technology. It's in, it's also in our activities for piping systems, activities for fluid control, but also in surface technologies, we launched some very nice new technologies in the U.S.A., even during last year.

But it's, yes, it's a locomotive, which is rolling. So that's how we aim for the 20% still. I think we can reach that.

Operator: We now have a question from the line of Martijn den Drijver from ABN AMRO. Martijn

den Drijver: Well, most questions have been answered, but to start off, Wim, when we talk about capital allocation and then the leverage in the balance sheet is low, you've explained that the clustering and improvements of the to-be-divested units is progressing.

How should we think about capital allocation in balance sheet? Should we almost pencil in share buybacks or, especially given that you mentioned only small bolt-on acquisitions? Or should we look at those possible acquisitions in somewhat of a larger sites? That would be question one.

Wim Pelsma: Yes. The answer is, as we always answered it, is that the disciplined capital allocation, and we even had a slide for that in the past, has not changed. So that means that the first thing is our dividend, of our 30% dividend, which we want to pay out, as we also did in '20 of these figures of '19, but we also will do now again. Yes, the second thing is our organic growth plans here for CapEx.

Yes, we aim for €140 million, €160 million due to the lot of organic growth plans, which we'll pursue. And the third thing is that we want to, yes, to increase our market positions through bolt-ons. And we also said it could be that you have a bigger opportunity. When the price is right and the synergies are there, that you also do a bigger opportunity in the case of a higher revenue or higher, or a bigger company. So I think all is still the same.

I agree with you, the leverage ratio is, even in this year of 2020, we were even able to reduce it. It says something about the strength and the cash flow we have in this company. And, but I would like to address that, yes, for us, we are entrepreneurs, and that's still the case. So when we have, when we can allocate our money to improve our business and also to improve our market positions, that's, by far, preferable for us. And I also always said, the moment we have too much cash or, which is not the case because we still have €400 million, €444 million net debt before IFRS, then, of course, we will also think of other ways to give the cash back.

I must say the environment for M&A is good for divestments, but we also have a nice pipeline at the moment. And I think we feel ourselves pretty safe to do these steps. Of course, last year, we were cautious. We did it on purpose because you have to protect your company, but we have a nice pipeline. So yes, I would say, let's see.

We are open for bolt-ons. And in the press release, you could see that the word small is not mentioned. So it can be a small one. It can maybe also be a bigger one in the future. You never know.

But it is an aim for us because also you see now step-by-step that our migration of Aalberts and also the strategic restructuring is getting more and more paced. And yes, we're aiming for our objectives, but there comes also another phase of ours and, in my opinion, should that be a growth phase absolutely organic, but also inorganic because we are also good at it, inorganic, and we have the balance sheet to do it. So that's also why we are not thinking, at the moment, of share buybacks or higher dividends because we still think we can utilize the money and the cash to strengthen our company. But when it comes a moment when we have too much cash, in our opinion, we will give it back to the shareholder. But it's not our first objective.

Martijn

den Drijver: Okay. That's pretty clear. Then on, just a clarification on the '22 targets, you say you maintain them. The situation with regards to possible divestments is clear. But are you able, where you stand today, to achieve those targets without major acquisitions? Would that be a proper conclusion?

Wim Pelsma: Also we stick to the objectives, but maybe also going back to, that's a long time ago, to 2017, okay, and you talked about bigger acquisitions.

So we also said in '17, when we launched the strategy, and in '19, we updated the strategy, we said when we do, of course, bigger acquisitions, which, of course, in beginning, dilute a little bit your return on capital, yes, then, of course, you should take that in mind because, that, in our opinion, would not be completely fair. That's what we said in '17. It's still the case. But I think, yes, the line we have now taken, which is still the same line, as we explained in '19 that we will do our divestments, maybe a little bit less because we close a little bit more locations, could be, but let's see. And we still strengthen our positions in that field.

Yes, we still, we can achieve our objectives. When we do a bigger acquisition, yes, which, of course, means also higher capital employed, where the return on the capital employed will take longer, yes, it could be that you maybe not completely hit your return on capital of 18%. But I think that's also a part of the balance you have because you have then a better position, which we also said in '17. So, but there are coming opportunities. There are coming opportunities.

So hopefully, also this time, it gives you a little bit guidance. Martijn

den Drijver: And then moving on to working capital. You mentioned the European distribution optimization program. When should we, in terms of phasing, expect that program to be completed? And does the positive effects on inventory and working capital to come through, is that an H1 '21 effect? Is that a 2H '21 effect? And a kind of similar question for the remainder of the savings in 2021, so this is from the restructuring. How should we view those relative to the first half of the '21 and the second half of '21?

Arno Monincx: Regarding the working capital, what we have explained in '19 is that we have a three-year program between €100 million and €150 million of inventory reduction calculated on days.

That is still the program that we work on, and that is also what we have discussed with all our business teams to make structural improvements, so not only temporary, but really structural improvements with good actions behind it. And that is, I think we started off this year in a difficult market environment, but we managed to bring it down and even to improve a little bit the days despite the strong decrease of revenues. I believe the trend is ongoing, so that will continue also in '21, the improvement. But, of course, also, our business will grow. And that's also why we always have said yes, we improve, calculate in days €100 million to €150 million.

But again, we are in line with that goal.

Martijn Drijver: Specifically [Technical Difficulty] when is that process of closing European smaller distribution centers and grouping them in the European centers, when is that finished? Is that going to be finished in the first half? Or is that going to be finished in the second half? So we have a bit of a picture when those benefits come through.

Wim Pelsma: Yes, maybe I should take that. I think in America, the U.S.A., we have optimized the situation. We have brought it together.

It was a difficult project, but I think it's pretty optimized. And also you see already the effect in the inventory reduction, but that will continue. In Europe, we, as you know, we have built our distribution and assembly center in Zeewolde, which was finished last year and actually operational a little bit beginning last year or maybe the end of '19. So what we did then because we have to integrate eight warehouses yes, eight. So first, you have to get the warehouses, which we had in Holland, we have integrated it.

Then the software has to be running. Now that is done in '20, even despite the pandemic where we also had our issues there to do that. And now, we are step-by-step integrating the other warehouses. So I think, personally, it will take us the whole year '21 and maybe even partly some of '22 to get that all done because, yes, it's eight warehouses. So let's say, we did two bigger ones, and we still have to do, let's say, two bigger ones and then four small ones.

And every time you have to adapt your IT infrastructure. So America is done. And Europe, let's say, will be done, let's say, the first half of '22. That is and then step-by-step, we are, of course, in parallel, we are reducing already the inventory because the moment you move the inventory, you clean it up. So that's a parallel process.

But I think the cash flow, which you saw in 2020 of 300 free cash flow of €339 million was also for a big part, inventory reduction. So and I think we have now very good momentum, which is driven by Arno and the team, yes, to gain really traction further. But it's already visible, but it will become more visible. So hopefully that...

Martijn Drijver: It's clear.

And then on the final one on the remaining savings. If you could perhaps divide that €40 million that's still to come between the first half, the second half or perhaps even 2022.

Wim Pelsma: Yes, I think it's difficult to say if it's first half or second half, but let's say, we stick to the €50 million, 20%, roughly €10 million, we took advantage in '20 and €40 million, we took -- take advantage in '21. It depends a little bit how quick these projects go because we also closed locations, yes. That means you have to make agreement with people, you have to talk to, yes, a lot of institutes to get that done.

It's a lot of work. So sometimes that delays a little bit. So it's very difficult to put a figure on. But I originally thought that we could have done it all in summer of '21, but you see already now, it's a little bit delaying to quarter three, some projects, due to these effects. But yes, I think '21, we will really end up all these projects, which we defined April -- from April onwards last year.

How it's exactly divided is difficult to say. We would give you a wrong number, in my opinion, but --

Arno Monincx: No, I agree.

Wim Pelsma: And we always said, when we get the revenue back on the 2019 level, yes, because that's also important for your absorption and your -- yes, your, let's say, the coverage of your cost, of course, yes, then you can count in the €50 million. So when the revenue will still be behind due to pandemic reasons, now let's say, we get a new variant besides the British or the Brazilian or the South African variant, we get another one, yes, that could delay, of course, these things. But I don't hope so, but that has also an effect, of course.

But I think what you should take in account, when the revenue comes back on '19 level, we count in the €50 million.

Operator: [Operator instructions] Our next question comes from the line of Tijs Hollestelle from ING Bank. Please go ahead.

Tijs Hollestelle: The first question, I noticed a new item on the balance sheet, what is it, current portion of other provisions of about €22 million. This is, I guess, the near-term expected cash outflow relating to the restructuring charge you took in 2020.

And is this the total amount? Or do you expect, let's say, also cash outflows beyond 2021? That's the first question.

Arno Monincx: Right, Tijs, we took a total strategic restructuring costs of €51.3 million. Out of these costs, €8 million stands for depreciation, which, of course, was also booked in 2020. We paid out in 2020, €21.2 million, which leaves a €22.1 million on the balance sheet for cash out in '21.

Tijs Hollestelle: Okay.

Got it. That's clear. Yes. Then, also, back to the inventory levels. If I remind well, you were guiding for an improvement -- structural improvement between €100 million and €150 million.

We do see, indeed, as Wim mentioned, a €71 million year-over-year reduction on the balance sheet, but we do see a €42 million impact in the cash flow. So was that target based on the absolute balance sheet number or the expected cash flow gains of that target?

Wim Pelsma: I'd say the difference between the €71 million and the €42 million is, for a big part, is foreign exchange currency rate differences. So that is about €27 million, the exchange rate differences. And what I said earlier also in this call is that our aim is to save €100 million to €150 million calculated in days. So that means if you would record hours in 2022, and we have, at that time, a revenue of X, you could also see how much we really improved our days inventory outstanding at that moment, and that should calculate back, the improvement in euros.

And again, yes, we are in line with that goal. So it's for sure, gives also positive cash flow effect. TijsHollestelle: Yes. Okay. And also, normally, in the annual report, Aalberts provides disclosure on the line items within the other operating costs.

And there is one line item called operating income. Last year or in 2019, the comparable number was €43.5 million. Could you give us the number for 2020?

Arno Monincx: That's a lot lower because last year, we had, of course, still the effect of the fires in this other operating income line. And for this year, it's about -- it's€40.5 million, the other operating income. So the effect of the fires is actually out.

TijsHollestelle: Okay. Yes. Yes. And then -- and last one, and that is also a difficult one for me. I listened carefully to your comments on the restatements per division.

Before the pandemic hit, there was already, let's say, discussion, I think, between you and analysts, but also between investors about the disclosure on the reporting line organic growth, the contribution from M&A per division. So yes, I do understand that you now have reallocated the businesses. But more than ever, it is quite important, if I'm looking at my first half, let's say, revenue growth forecast per division, given what happened in the second quarter last year, that I have some comparison base, which is now, again, completely gone. Because you explained yourself, there are quite some businesses within these business clusters and also countries, so that makes analyzing it already pretty difficult. So one thing we at least have is the historic performance over a longer period of time of these entities, which is now completely reset.

So if you could provide us at least with, let's say, the comparable first half '20 revenue and EBITDA numbers of now the new divisions because the COVID-19 impact was quite different. Some business has dropped by 15%, others by only 5%. So that would be quite helpful. And yes, I would really appreciate it if these restatements would eventually stop.

Wim Pelsma: Yes.

I understand. But as you -- when you are doing strategic restructuring, sometimes that happens, but I can imagine from your side. But we...

Arno Monincx: We can give that insights, Tijs. So we will give you more insights in the comparable numbers also.

TijsHollestelle: Yes. I mean, I understand that you guys look at the headline numbers, but in light of reaching the targets, we're trying to calculate how to get there. So for us, it's quite important. And I don't think only for analysts. I think also a lot of investors are doing the same calculation.

So it's for us, it's really important.

Wim Pelsma: Well noted.

Operator: Thank you. We do now have a question from the line of Maarten Verbeek from The Idea. Please go ahead.

Maarten Verbeek: It's Maarten for The Idea. Firstly, you state that you reiterate your strategic long-term targets, which is obviously pleasing to hear. But again, coming back to the average growth rate you project that was more than 3%. And if we have seen over the past three years, then more or less, you're suggesting, by reiterating the statement, that you predict organic growth of about 8% for the next two years per annum. Is that a realistic number to assume?

Wim Pelsma: First of all, you know the year '20, we went down a lot.

So I think we'll also get to recover in '21 for a big part. So that, how that completely works out, again, the pandemic is still going on. So when, of course, when the pandemic will stay on this all year, and next year also due to additional variants, yes, then, of course, it could be that you don't hit it. Yes, that could be. But that's not the situation as we judge it now.

So '20, yes, of course, is we went minus 7.0%. But in '21, you will see a recovery, yes, and we will see how much that is. And, so that's why we still think, and also '21, we will see a recovery. When you look to our business in fluid control, for example, yes, we will see a tremendous recovery, which is still has to come in the second half because it's industrial-orientated. So, at the moment, the world, let's say, is not locked down anymore, you will see tremendous improvement in many areas also for us, besides what we do already now with innovations.

So that gives us the reason that at the moment, we still think we achieve it. And yes, a big part of that recovery will also be done in '21, but also still a part in '22 [Technical Difficulty] but, yes, you know yourself. In the Netherlands, we can't even go outside

after 9:00. So when that situation stays for whatever reason, yes, that, of course, it makes more difficult. But not at the moment.

We judge it with everything what is going on, also, let's say, regarding vaccines and everything. Yes, you will see in the industrial markets a hiccup in the second half, mainly, and the other markets are already recovering, where, yes, and we trust also that our innovations really ramp up.

Maarten Verbeek: Okay. And secondly, you ended the year well with an order book, which was close to 10% higher than year-end '19. Are you able to provide us with a quantitive number?

Wim Pelsma: Quantitative number? No, we are not able to do that.

Maarten Verbeek: Okay. You mentioned that you already made a number of divestments in '20. What you have done today, could you provide us how much sales will be gone for '21?

Wim Pelsma: For '21?

Arno Monincx: You mean the divestments that we did in '20?

Maarten Verbeek: Yes, exactly.

Arno Monincx: It's a very small number, Maarten, because these were two very small, very small sites, so maybe only a few million.

Maarten Verbeek: Okay.

And then next to that, you, when I look at your EBITA contribution and also the EBITA charge for holding and eliminations, that was virtually nonexisting in the second half of the year. Could you provide some more insight on that?

Arno Monincx: Yes, that is good, you have seen that correct. Let's say, in the total full year number, we went from €11.7 million in 2019 to €7.2 million in 2020. That means that the holding costs have been reduced and the extraordinary costs have also been reduced because the extraordinary costs, the normal extraordinary cost that we always have every year, they went down from about €3.3 million in 2019 to €1.3 million in 2020, which means that the holding costs at the end also were brought down from €8.4 million to €6.0 million. What happened in the second half, of course, is that the strategic restructuring costs that we also guided that have been taken in the first half year numbers, we took out because that is something we put separately.

And why did we take it out? Because these were, is part of the strategic restructuring benefit plan, the total of €51.3 million of cost, with an annual benefit of approximately €50 million. And because of the character of recurring, and that's a big difference with normal extraordinary costs, which are normally a one-off.

Operator: [Operator Instructions] We do have a follow-up question from the line of Tijs Hollestelle from ING Bank.

Tijs Hollestelle: And the question about the jump in the minority line item in 2020 versus 2019. What is behind that?

Arno Monincx: Let's say, good performance of the minority business.

Let's say that's one of the businesses where we have not a full 100%, but there's always also a third-party having the minority stake. And they are making a good growth development, also that part is then increasing.

Tijs Hollestelle: And what type of business is it?

Wim Pelsma: It's a company in Eastern Europe, in Poland, where we have a very good partnership with, where we, and it's part of piping systems. They're making plastic piping systems, combined with our metal piping systems of Aalberts. So we have there a very good cooperation already for more than 10 years, almost 15 years.

And yes, that's a minority stake for them and for us, a majority. And they did very well. So we, it's one of the examples of innovations and also market approach, which we did very well, combined with our press fitting range. So they made good progress and made a nice profit.

Tijs Hollestelle: Yes.

And also one, basically on the question from Henk from Kempen, on the gross margin pressure in the second half, if I understand it correctly, that is because the top line decrease in the higher added value businesses was bigger compared to, let's say, building installations and climate control. But wasn't that more the case in the first half then? Or is there kind of a lagging effect on the gross margin from that?

Wim Pelsma: You have two effects, we explained. One effect is what Arno said, is that you have the, especially surface technologies recovered more gradually than the rest. So there, we have a high value margin. So the mix is different.

And the second thing is the effect of inventory reduction. So the moment you start reducing your factories in April, March, we did that, yes, it takes time to, yes, to slow down your factories because, yes, these are big factories. So you cannot immediately see the effects. So the most of the effect you saw in end of quarter two, quarter three, quarter four. And when you produce less, yes, you have also lesser added value in these factories.

So that combined effect yes actually, we were very happy with the added value, looking to the 40 more than €40 million reduction of inventories, which was mainly made in the second half. So you also lose there your added value partly, which will ramp up again the moment you are producing, which is now the case. So that is the explanation. On pricing, we didn't lose. And it also has nothing to do with the raw material increase because we are always covered with our raw materials.

Our goal is for a certain amount of months, so that we have the time to increase our pricing, which we also pursued already last year, this year again and probably again in April, May. So that to be very clear there, that there's not a wrong picture.

Tijs Hollestelle: Yes, it's very clear. There's a timing effect.

Operator: We have now come to the end of our Q&A session.

All questions via the phone lines have been answered, and we have no questions via the webcast. So I'd now like to hand back to our speakers for any concluding remarks. Thank you.

Wim Pelsma: Yes. I would say thank you for listening to our webcast.

And yes, it's always a pleasure to explain it to you all. And also, thank you for all the questions and interest, and we will push you further. Thank you very much.

Arno Monincx: Thank you.