Datagroup SE

XETRA:D6H

Earnings Call Transcript 2023-Q2

[Operator]

Welcome to the DATAGROUP SE conference call on the half year figures for the financial year 2022-2023. [Operator Instructions] The presentation will also be made available for download in the Investor Relations section on DATAGROUP's website.

I would now like to welcome Mr. Andreas Baresel, CEO; and Mr. Oliver Thome, CFO of Data Group.

[Andreas Baresel, executive]

Yes. Good morning, everybody. We are happy, me and our CFO, Oliver Thome, are happy to welcome you to the presentation of our first half year figures of the fiscal year '22, '23. And I hope you can enjoy the next hour going through the latest figures of DATAGROUP.

So we are quite happy to present another positive half year '22, '23, and I think we can say we were successful and continue our success story despite we still have a quite challenging environment. Our strong results again prove the sustainability of the DATAGROUP strategy to focus on recurring revenues with long-term contracts on the basis of our CORBOX service and cloud portfolio.

If we look on the numbers, we managed to increase the revenue from EUR 247.6 million to EUR 251 million in this year's first half year. And that's even if the first half year of last year was still under influence of several extraordinary effects. For example, we had a full half year of recognition centers in the revenue and so we managed to even increase the revenue only on a pure operational business level in this year.

When we go to the EBITDA, we have an even better increase from EUR 37.4 million EBITDA to EUR 39.4 million EBITDA, with an EBITDA margin of 15.7%. And when we go down to the EBIT, we are really proud of the development we see there. We have developed an EBIT from EUR 20 million in last year first half year to EUR 22 million -- EUR 22.8 million to be exactly in this year's first half year, and that's an increase by 14% on this level. And what we are also very happy about is that we have reached for the full half year an EBIT margin of 9.1%, so fulfilling our midterm ambition to have an EBIT margin of 9% or more.

On an EPS level, we also increased from EUR 1.45 per share to EUR 1.74 per share, also an increase by more than 19%. If we compare the increase in revenue to the growth and increase in EBIT, we see the increase in the results is much higher so we increased profitability much more. And to explain this we have to see 2 parallel developments that we have there, especially on the revenue level.

On the one hand, we were quite successful in further growing, having organic growth of our CORBOX core business, especially last year's strong order intake came into revenue stream in this first half year. So after a successful transition, these new customers we won in the last fiscal year are now all in a rent revenue phase, running their IP with CORBOX services.

So we have a good organic growth in this area. But in parallel, we do what's part of our model, part of our growth story. We are transforming low margin, especially time and material revenues. We are integrating the capacities, the experts of these services into our CORBOX production to be able also to grow in the next years with more -- a higher production capacity in this area. So these 2 effects bring us to the effect that the top line, the revenue level has only a slight increase, but we see the big effect on a profitability level. Like you see, we now step from 8% to more than 9% EBIT margin on this level. And I think this proves the good profitability of our CORBOX model when we continue in this process.

We did this or we had this development during, like I said, still a very challenging situation. We have, like everywhere else, increases in wages. We have increases in energy costs, in hardware prices. But what we successfully managed is to compensate these effects more or less based on our CORBOX production model. And I have brought here 2 examples. We have measures how much output we create, for example, from 1,000 kilowatts per hour on a monthly basis. And if we compare the '21 figure, we were something about 180 virtual servers and increased this by 27% to 228 virtual service servers. So we see there this increase in productivity. There we can conquer or with this effect, we can compensate the increase in energy costs we had. At least still in the last year, in the first half year, we are reporting about maybe energy costs will come down again in the present now, but that was a good effect to compensate these effects using the strategy having shared CORBOX cloud infrastructures.

Also, we improved our platforms with more energy-efficient systems and reducing systems which have higher energy demand. And therefore, we also improve our sustainability in terms of green IT.

Another effect also showing how we compensate this challenging environment is when we have a look at the investment efficiency. We are always monitoring the productivities, how much productivity can we gain if we look at EUR 1,000 depreciation on a monthly basis. And we are -- if we are comparing where we came from, for example, in 2019 to 2022, we have here an increase by 32%, and that's already after increases of hardware prices in the last 2 years when we were investing in the 2% in productivity in this area. And that's another way to, for example, compensate the supply chain issues we have at the moment because with these effects, we can handle more capacity reserves in our platforms using this 30% more productivity.

And there are 2 examples how we are facing the -- was a still challenging environment. And as I said, we are quite happy with such numbers in such an environment at the moment. And we see in our industry, not everybody is handling the situation as well.

And we are still keeping to our growth strategy and our growth ambition, which you might remember is based on 3 elements. The first element is the growth with new customers. Like I said, we had a very good order intake last fiscal years, and we continued its track in this year.

Our ambition is to have EUR 10 million to EUR 15 million on an annual base additional revenue potential with new CORBOX customers, and we are on a very good track there. We won new customers with nice contract volumes in the consumer area, in the public sector, in the aerospace area, in the media area, all additional new CORBOX customers, where the contracts were signed in the first half year. And we can now start with the transition phase, so they will come also part of our revenue and our CORBOX core business growth in a few months.

The second element is growing our business by cross and upselling additional services to existing CORBOX customers. There, our ambition is also EUR 10 million to EUR 15 million on an annual basis, additional CORBOX business. And we are also on a good track for the first half year. There a very nice additional service packages from customers in the chemical industry, for example, or also in the public area and the finance sector, we have very nice up-selling and cross-selling of additional CORBOX services, some of them even more than doubling the existing or former revenue of these customers. So also on a good track in this area. And -- but in parallel, as I said, we are also transforming low-margin revenues, especially from former acquisitions, which still have part of these revenues ongoing, we are transforming and bringing the capacities to the CORBOX business. And that's why on the top level, this core growth is not always this visible. It's visible if you look further below on the profitability.

Concerning acquisitions, which we are transforming the ones of the last years is our third part of the third element of the growth. And we are really happy to report also next successful steps there. We could acquire, at the end of the first half year, the systemzwo. It's a German south of Germany in the [indiscernible] area located service provider, EUR 12 million in revenue, and the systemzwo is bringing a quite interesting customer base to DATAGROUP, and a customer base, which we think will be a very good potential for future CORBOX services. So also transforming the business into recurring long-term contracts based on CORBOX services. So that's another acquisition following also our inorganic growth path. And so another step also good approach for the first half year.

And let me now hand over to Oliver explaining a bit more in detail the KPIs and P&L figures which we reached in this first half year, showing also the good development of DATAGROUP. Thank you. Oliver?

[Oliver Thome, executive]

Thank you very much, Andreas, and I welcome you from my side as well for the presentation of the first half year figures of DATAGROUP in the fiscal year 2022-2023. And I would now want to show you a little bit more deep dive to our profit and loss ratios and statements.

Therefore, I would like to make a short addition to the development of our revenue side, which you can see, we have changed in a positive way to 1.4% to EUR 241 million. And besides the effects Andreas just has explained, we have further an additional point that we have with the IFRS 15, that means the principal agent. Principal agent means that we are not able to show the revenue streams of license revenues. So there, we are only the agent part. And this declining of the agent part in our new stream has been roughly EUR 5 million instead of the past year, which we were able to compensate with our CORBOX and core business in DATAGROUP, what you can see on the financial or in the EBIT results.

On the second one under there I would like to be very concentrated in is that we are already able and still able with a very good proportion of our service revenues, which remains on a very high level with more than 80%. Besides this, and this is very important to have a quiet look on the combination of the material expenses and the personnel expenses.

The personnel expenses you can see are growing absolute. This is mainly driven by the first-time consolidation of our internal production units of nearshoring companies. And like, for example, [indiscernible] as well, which makes the net turnover mainly in DATAGROUP -- with DATAGROUP market units.

But when you combine -- and this is very important to understand our business model and the sustainability of our business model. When you combine the material expenses and the personnel expenses, there, we were able to make a change between external experts and to hire them on our own site. And when you can see and when you come together, the material expenses and the personnel expenses, you can see they are declining instead of the past year, which made the effect that we were able to increase our EBITDA from EUR 37.4 million to EUR 39.4 million.

What we can see beside this, and this is what Andreas has explained that our EBIT of EUR 20 million in the past year, we were able to overproportional increase to EUR 22.8 million. This means more than -- or roughly 14%. And the financial result still remains and keeps on a low level. And beside this, and this is extremely interesting for us, is the EBITA, that means that we show our EBIT without the depreciation of our purchase price allocation, which is the result of our inorganic growth strategy. And when you look that we were now able to increase our EBITA beside our goal of the EBIT from 9% and the EBITA. And this means this is quite the amount and the account, you can see the really strength of our business is more than 10%. This means that we are able to increase the EBITD as well and the net income, which is the same like the EPS with [ 15.4 ] or nearly 20% in total.

Let us now have a look in our balance sheet and in the accounts we can see there. Our balance structure is still very stable. And you can see our goodwill development, especially driven by acquisitions of the past year there, the systemzwo what Andreas just had explained is not included. And what you can see is that the combination between noncurrent liabilities and the current liabilities, the amounts in total are nearly the same. And that means, and this is very important for us, that we have a sideway movement in the net debt, and this...

[Technical Difficulty]

[Operator]

Mr. Oliver, we can hear you again. Would you like to continue?

[Andreas Baresel, executive]

Yes. So audio's fine again. I would again hand over to Oliver.

[Oliver Thome, executive]

Okay. Now I would suggest we will just start, sorry for the interruption, with the segment of the balance sheet ratios for the first half year 2020 to 2023. And what you can see is a very stable development of the balance sheet. We just increased our goodwill. This is due to the acquisition of the past year. The acquisition of systemzwo, which Andreas just showed you is with the first consolidation of the 1st April of this year, and so no part of the balance sheet figures for the first half year.

When you make in total the noncurrent and current liabilities, we were able to hold them on the same level to the previous year. And this is very important to see and to show that we were able to let the movement in the net debt in this despite the investments and acquisitions on the same level. The net debt and EBITDA ratio is with 1.4, a very, very good amount, and this allows us to have many firepower for further organic and inorganic growth for the future. Very proud we are on the development of our equity ratio, which lies from 23.7% to 28.4%. And this is very important for us, and the balance sheet total amount rose due to the good rollout I've just explained.

We are very focused on everything what is around on the cash flow statement. And there you can see that we have still a very, very solid cash flow from our operating activities. This is with more than EUR 28 million, very strong and shows the strength in our business model and in our strategy we just bring to the market with DATAGROUP.

What we have done with our cash flow from what we have earned, we invested it and invested it mainly in the outflow from acquisitions, you can see with EUR 43.8 million. Beside this, we invested in our infrastructure for onboarding the CORBOX deals we just realized and get the order in the past year and to be able to board them in a very professional way.

Besides this, the cash flow from financing activities is nearly on the same level so that we have a very stable change or not change in the cash and cash equivalents, and we were able to finance us with our money which we earn from our business.

[indiscernible] are with us since several years. When you look at the long-term view of our EBITDA development, you can see that we stabilize the EBITDA margin meanwhile, since more than 4 years with more than 15%. And this is very important to see that the more than 15% we realized since 2 years without onetime special effects from acquisitions. There, we have some effects which we could realize and which will be shown in the EBITDA margin. Meanwhile, we can show it in our operating EBITDA margin, and this is quite a good and stable development.

Besides this, and this is very important. This is very important for us as well is that you can see a development from our customer side that they can be managed with a finance lease and finance lease is not shown in the depreciation. It's shown in the materials and other expenses, so that the development could be compensated with better margin in the sales.

[indiscernible] development as well. And there, you can see what I've just explained when we made the strategy to bring our CORBOX cluster for the banking insurance sector, 3 years ago to the start that there you know we had many costs for CapEx to invest in these structures and our CapEx investments now came back to a normal level. So you can see we have declining depreciation, which brings us a very good and stable business especially in the past year, 2021, 2022 with more than 8%. And what we have just explained is that we are now able to realize more than 9% in the actual fiscal year in the first half year.

Therefore, and to explain what's our business model and our organic and inorganic growth. We just want to show you the EBITA. And the EBITA, we just realized in the past year with nearly EUR 15 million and then a percentage of [ 9.7% ] to the revenue stream it's now more than 10%. It's in the first half year, 10.6%. And this shows the operating power we have just realized in our business model in the first half year of 2022-2023.

We just saw that the slides were not continuing in the transmission. Check again.

[Technical Difficulty]

Sorry for other technical problems, we've just had as you can see. It's the system, which we used since several times. We didn't ever had some problems with this. But I think that the traffic here of Internet is meanwhile very high, but I think we can answer every questions and you can see, and we will deliver later on a presentation -- at the end of presentation we just held or hold here. And you can see everything. We maybe not always be able to show you on the screen, sorry for this.

So what are the measures to achieve our objectives? And the measures to achieve these objectives is what I've just explained with the bridge of...

[Technical Difficulty]

Sorry for the technical problems, we have a problem with a provider and the connection broke down. And therefore, also the slides were not following the presentation, we can just check again and go out here.

[Operator]

Okay. We should be able to see the presentation now. Could you please tell me which slide you want me to switch to? Could you tell me which slide you want to switch to?

[Oliver Thome, executive]

The first slide -- the last slide, we have just explained how -- what are the measures to achieve our goals. It's I think two further. No, one further -- and the measures -- what -- one slide before, please.

And the measures to achieve our objective is what I've just explained. And this is the difference between the EBITDA and the EBIT, and this means the reduction of our CapEx and the reduction of our CapEx forces the reduction of the depreciation. And this means that the difference between the EBITDA and the EBIT becomes smaller and our profitabilization is quite good.

What we are seeing as well is the profitabilization of currently underperforming subsidiaries are developing as we planned, but we are still in a mode there, and we will working very hard on it. So this is the profitabilization we have had a second pillar on our measures.

What we do as well, and this -- you have just seen and Andreas explained it from our transformation of the non-CORBOX business into long-term contract volume. And this means that we especially brings the revenue stream we made from normal production and for normal goods and sales of selling goods to long-term CORBOX business. And so this transformation to long-term revenues will especially force us and brings us to a better profitability.

What we are doing as well is and we know our centralized production model and the centralized production model allows us to bring more digitalization and automation in our own services. And this is one of the most things we have now just seen with them. The companies we just have in our own group like [indiscernible] to automate these -- our production model and to make our own service more efficient.

So we have some technical issues on our side. Sorry, once more for this, on the end of our presentation, and I would now open the stage for the questions.

[Operator]

[Operator Instructions] The first question we have is from Mr. Knut Woller. It's what makes you optimistic to accelerate growth in the second half of 2020-2023. Looking at the order momentum in 20 -- in the first half of 2022-2023, should we expect accelerating growth in 2023 and 2024?

[Oliver Thome, executive]

Okay. I think Andreas, do you want to answer or should I make the talk over. I think Andreas is still not online. And what we have just seen is that I've just explained that we didn't have the acquisition of systemzwo. So these are some effects we just expect on the second half year of 2022-2023. The effect we have just explained with especially principal agents, we have to clarify what -- what's the effect for the fiscal year 2022-2023 in total. But I think we have -- we are looking for a challenge. And I think in the past half year, we have -- in the past fiscal year, seen that the revenue streams are higher than in the first half year. So we will see where we can settle on.

But for us, very important is to be focused on the profitabilization of the company, stabilizing and bringing our EBIT goals into our P&L and especially beside this, our cash flow statements. And there, we are optimistic that we are in a good mood.

[Operator]

His second question is on the M&A update. Are prices becoming more reasonable again? And should we expect M&A to become a more noticeable contributor to growth again going forward?

[Oliver Thome, executive]

Okay. I would say that the EBIT margin on a high level, but it remains a little bit more. You can see that in the past, I would say, 5, 6 years, the EBIT margin rose from, I would say, 3 up to 4 meanwhile to a level between 6, 8 and sometimes, and this is what we can see is companies which with a known revenue stream with about EUR 50 million. There, we are often in competition with private equities and private equities are still active in the German market. So I would say we see a little bit more stabilization in the EBIT margin.

We are focusing on the strategic fit for DATAGROUP and what we can take as synergies, for example, and then we have to combine the price for the company with our own expectation what they can bring for our profitability on the long term.

[Andreas Baresel, executive]

Maybe to add there, we are also expecting a decline maybe in the upcoming years again. So you're right. We hope that we can see a bit bigger part of growth from an inorganic sector. Again, like Oliver said, at the moment, we are -- have to look quite closely to the targets and the pricing effect if it's worth buying.

[Oliver Thome, executive]

And what you can see is that we got more targets than one before on our table, which we can analyze and choose if it's interesting enough for due diligence for our internal M&A team. And -- but this is -- you can really see that the M&A pipeline is growing for us.

[Operator]

Next up, we have Mr. Andreas Wolf.

[Andreas Wolf, analyst]

I have a question on the revenue development. You've already mentioned the IFRS 15 impact. Was this in H1, the EUR 5 million or only in Q2? Because if I look at the reselling hardware revenues, it seems like it was a Q2 impact. Maybe you could clarify this.

And then on the impact from vaccination centers and from the transition from time and material to CORBOX, what was the revenue impact associated with those to impact in your P&L? It would be helpful to understand what the volume was of the vaccination centers last year, but it was a Q2 revenue and what the volume was.

[Oliver Thome, executive]

Maybe, I will answer it in total. I think that are the main pillars, which we have changed into our CORBOX business. And this is what we have said. This is, for example, the vaccination centers. And on the other hand, we have the transformation from companies, from their domestic sales before they joined the DATAGROUP to our CORBOX business.

In total, I would say that will be roughly EUR 15 million, EUR 15 million in the first half year. I cannot -- I'm not able just now to bring it to the first and the second quarter. But in total, I would say we have overcompensated roughly EUR 15 million from expected decline in revenue to our CORBOX business. So when you look on our real I would say, organic strength, we must see what we have just switched from these effects to our CORBOX business.

[Andreas Baresel, executive]

Yes, maybe to add one part here. Part of this transformation is also -- and that's why it's difficult to really calculate it that former acquisitions like you might remember the acquisition of [indiscernible] from [indiscernible] several years ago already, the team of some experts for at that time, HP. It's DXC now. They are also including a kind of a revenue transformation already in the case of each acquisition. So that's what we are calling transformation.

And maybe the total number, if you would calculate all these effects together is even higher than the EUR 15 million Oliver just said. And it's always a question how strong is the effect in each period we are looking at and how many additional organic growth can we add to compensate these effects.

So I would say it's difficult to calculate, but especially if you look in the detailed case of the former acquisitions, we have already part of this transformation inside. And that's why we are still -- even if it's not on the top line really viewable, quite happy about the organic growth in the core business. And that's what we are also reporting on a yearly basis, how is our core business growing because it's always a part of growing after transition, and we will see that at the end of this fiscal year, which is the additional CORBOX core part of this year's growth.

[Andreas Wolf, analyst]

Okay. And the IFRS 15 impact was in H1, the EUR 5 million, right, or Q2?

[Oliver Thome, executive]

H1.

[Andreas Wolf, analyst]

Okay. And then I have another 2 quick questions. The EUR 30 million CORBOX revenues, which you won -- or not revenues per business, which you won -- what time period will this materialize? Is it basically the contract time period of, for example, 5 years? And the second is on the CapEx. What should we expect for the whole year?

[Andreas Baresel, executive]

Maybe on the first 2 questions. I'm not sure if I got you right. Our ambition is to have EUR 10 million to EUR 50 million on a yearly basis from the 2 areas, new customers and cross and upselling. So in total, that will be EUR 20 million to EUR 30 million, and we are in a good track in the year. And the typical contract period of these additional contracts we won up to now in the first half year. I think it was something like 4 years, a bit more because each contract is different. There are some 3-year contracts, but also at least 1 5-year contract. So the average would be around 4 years. And that's part of the model to win these customers and having this revenue after the transition period, save for the next in average, 4 years and get some other additional CORBOX customers next year. So as I said, we are now receiving the revenues from last year's CORBOX headwinds. Sorry, the second question was on CapEx, I think.

[Andreas Wolf, analyst]

Yes. the number we should expect for the full year?

[Oliver Thome, executive]

I think what we have just explained in the past is that we expect roughly 3% of our turnover. So it can be between, I would say, EUR 12 million in the maximum EUR 15 million. In the first half year, you have seen some investments in our own infrastructure for getting more, I would say, powerful and with our own data centers and data center infrastructure because the volume we just won in CORBOX business, you've just said, will be onboarded now, and therefore, we invested in our infrastructure. But we are not in a way that you have seen 3, 4 years away. So we are good with EUR 12 million to EUR 15 million, I think.

[Operator]

The next question is from [ Oliver ]...

[Unknown Analyst]

Maybe in regards to customer behavior, can you see any change there? And on a broader perspective, how do you expect the macroeconomic for DATAGROUP in the coming years? Any positive or negative effects you might be facing?

[Andreas Baresel, executive]

In terms of customer behavior, I would answer, there is no big change. Of course, the content, the technical services are continually changing. We are working here with highly innovative services. So the content and the technology itself, of course, is changing. But the basic behavior behind the advantages out of managed services to have a provider as a one-stop shop to -- especially for midsized companies, there, we see still a very big demand for this company who decide for this and to go for this and bring their services to the market.

So there's no change out of our point of view, even if technology and architecture, of course, is changing. For example, all customer situations are to today hybrid situations. So you have part of the workload in the public cloud, in the cloud of the hyperscalers like Azure and AWS. And we are providing our services on top of these platforms. And besides this on -- in our own CORBOX cloud. So that's what we call hybrid setup. That's kind of a change we have here.

But in the overall ambition to decide whether I sourcing selective services or full service that we don't see a bigger change there. And concerning the negative or positive effect in the future. In our opinion, and I just named it before, we are working quite hard on really integrating the teams from former acquisitions to have the capacity of experts to grow our business. And that's because of a lack of experts on the market. And if we take this situation to our customers, we see as a positive effect that only because of the lack of experts that today, it's a reason for going into a sourcing. In the past, it was more a cost factor or things like that. Today, it's only a situation because as a company, I don't find the people anymore on myself and I'm bringing the service to the market into a sourcing, for example, with CORBOX service DATAGROUP.

And a bit of a comparable situation we have with the satiation around security. There, it's even more challenging to find the right experts, not only to run your own IT but even to make it secure. And these are 2 examples where we see more positive effects in the future on our kind of business that especially the midsized companies will decide more and more to source managed services like the CORBOX portfolio because they have no other options, and they have to focus with their own stuff on really their business-specific digitization needs.

[Unknown Analyst]

And maybe as a follow-up question. If we take a look at up and cross-selling. Is there also a transitional phase? Or how quickly can you realize those order intakes?

[Andreas Baresel, executive]

With the up in cross-selling, we divided these 2 words. We call it upselling if we sell additional CORBOX services, depending on the services they also have a transition period. For example, if you are doing the workplace support for a customer today, and he decides also to give you the data center services -- of course, there's a similar transition, maybe not as long as with a new customer, but nearly before you can really -- you have transition these systems to our CORBOX cloud platforms and before they start running.

So for upselling, you have a transition phase, but we also see at the moment a good demand on what we call cross-selling, and that are more additional projects and solutions, not additional CORBOX services, instead additional project services and solutions. And for them, we can bring them directly to revenue because these projects in this type of one-stop shop, the customers typically asking us first if we can provide these projects to him and they become revenue directly.

Of course, the advantage of upselling is as soon as you provide additional services, and that's our real focus, you have an additional period of several years for these services. The project and the solutions is more short-term business for maybe 12 months as long as the system is running. And then other projects are coming. But for the upselling additional CORBOX service, that's our focus to look really to get the full share of the run wallet of the customers. So every spend he has for running his IT, we want to win for the CORBOX. And there, yes, you have also a transitional period.

[Operator]

Next up, we have a question from Mr. Tim Wunderlich. Could you please quantify the decline of revenues coming from vaccination centers? How much revenue from vaccination centers were achieved in the first half of 2022? And how much is it in the first half of '23?

[Oliver Thome, executive]

I think that for you to compare the past year with actual year, the vaccination centers in the past year, where we have them still through the end of December of the calendar year 2022. They -- this hasn't been a flat rate for vaccination centers. So you have just seen that the COVID pandemia has declining more and more. And I would say that in the first half year, we just had roughly EUR 3 million turnover with vaccination centers which are still down since the 1st of January.

I would say in the past fiscal year compared with this, we lost about, I would say 5 maybe EUR 6 million instead of this. And in the summer months, in 2022 -- 2021-2022, they made only a short sale because the vaccination centers were always active between, I would say, October until March. And that's it. But I would say, the effect and the turnover has just explained is roughly EUR 5 million to EUR 6 million less than the past year.

[Operator]

The next question is, could you please explain the drivers why gross margin is increasing? Is it only the back of declining purchased services?

[Oliver Thome, executive]

Yes, what I've just explained is that our margin increased because in the past, when you grow, you have to fulfill it with technical staff and with experts. And when you are not able to hire them, you have to go to the market and to acquire external specialists. And they are shown in the material expenses. And you know they are normally more expensive because the period we can use them for our projects is very, very short. So this is one of the many facts we have just had instead of the first half year -- of the past fiscal year that we were able to look for the experts we look for and to hire them from the market to our own staff.

And this is why the cost of the personnel and absolutely rise on, but we more than overcompensated with material expenses, step one. Step two is that we are just focused on the possibility where we can automize services. And there, we will be focused for the future as well because there, we see a lot of potential to be more profitable in which we use the technology we have in our own companies like [ Almarto ], which we use very strong and intensive for developing solutions for our own production possibilities in DATAGROUP.

[Operator]

The next question is what makes you confident to reach this year's guidance?

[Oliver Thome, executive]

What -- do you want to explain the revenue stream, I would explain the...

[Andreas Baresel, executive]

Yes, what make us confident. If you look on the first half year, we have now this EUR 251 million. We will have additional effects by the acquisition of systemzwo. And typically, in -- after the summer phase, and we will have still some transitions to start running now, as I said, for example, last year's customers, the exhibition company, they just started. So we will probably see an increased revenue also a little bit from these effects. But as Oliver said, the IFRS effects come in addition this year, that was later than we gave the guidance.

So I would say what makes us confident, it's quite challenging this year to reach the guidance. Like we said, we will at least reach EUR 520 million, but we are still confident that, that could be feasible on the revenue level.

On an EBIT level and the earnings level, we are quite more confident because this negative effect from transforming revenues or the IFRS effect, they have all more or less no impact on the results. And that's the reason why we are quite confident to really reach our guidance in the -- concerning the EBIT and the EBITDA guidance. And as you see up to now, we are in a good way here. So I would summarize this way. For the revenue, it will be challenging. It's especially because of revenue transformation and IFRS effects. For the EBIT level, we are quite confident to reach the same level of guidance in the detailed numbers we gave in the guidance even if the revenue would be maybe a bit lower.

And that's where our focus is. We are not doing the job for getting more revenue. We are doing it to get to an EBIT.

[Operator]

Next up, we have a follow-up question from Knut Woller. When do you expect [indiscernible] and DATAGROUP on the group level in terms of profitability?

[Andreas Baresel, executive]

For [indiscernible], I would say the acquisition of systemzwo was a very big step into this direction. And I would say -- next fiscal year, we will see in [indiscernible] where we have in total then approximately a revenue of nearly EUR 30 million. We will maybe not see the full data group level like 9% EBIT, but quite close to this because called the combination with good, very good customer access from systemzwo and the delivery ability from DATAGROUP in total, but also with the experts in [indiscernible] we found a very good setup there.

So that is, of course, still necessary after joining them just beginning of April now to get these things together, the rest of this fiscal year, but I think next fiscal year, we will see nearly the DATAGROUP level in this area.

A similar situation we have in Dusseldorf and overall, with our banking cluster, we have made very good progress on a production and service quality level there and also with the profitabilization of the customers. And we are just negotiate with one of our main customers. And I think there, we also will see another big step into more profitability in the next year, '23, '24, but also not on the full data group level. I think it will also take another year as they are to reach nearly this level because these customer situations there, they are more complex. But on the other hand, they have much longer contract periods. These contracts are many of them running into '27, '28 partially. And so also, we have a bit more time frame where we can do this process. But we are happy with the progress we made this year, some important upcoming at the moment.

[Operator]

At the moment, we have no further questions. [Operator Instructions]

[Andreas Baresel, executive]

Maybe one comment, on our technical issues. Sorry for this. As I said, the connection to the provider broke down, and we just found out during Oliver's presentation the slides were not flipping anymore. So maybe as in the past, the slides are available on our website for download. So the 4 slides maybe which were short, the cash flow slides and the slides about EBITDA, EBITA and EBIT, you can again access them downloading the presentation, and I hope we still could follow Oliver's explanations concerning this and have a look on the slides later on. Sorry again for this.

[Operator]

We have no further questions. I would like everyone for attending. And Mr. Baresel, do you want to say the final words?

[Andreas Baresel, executive]

Yes. Thank you. So thank you, everybody, for joining. And also thank you very much for the detailed questions. I hope you found good answers. And as I said, we will have you -- if you download the slides later on, have again a look and sorry again for the inconvenience. And yes, we are both happy to meet you again for the Q3 numbers. We will be quite closer than how things are going on. But as we said, we are very confident and also very satisfied with the development of the group up to now. And I think that will continue in quarter 3 and 4 and so getting also a very successful overall fiscal year, especially in terms of profitability and earnings.

So thank you again, and hopefully, see you soon next. Bye-bye.