Jenoptik AG (JEN) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Jenoptik conference call regarding the Q2 results 2021. [Operator Instructions] Let me now turn the floor over to Dr. Stefan Traeger.

Thank you very much, and a very good morning from our end here as well from lovely and sunny Jena. With me today is Hans-Dieter Schumacher, our CFO. We're more than happy to welcome you to our earnings call. Before we get into the details, please let me draw your attention to our safe harbor statement, which you can find on Page #2 of our presentation. I'm not going to read it out, but please do pay attention to our safe harbor statement. Well, I'm very pleased to say that the first half of the fiscal year 2022 -- 2021 -- sorry, 2021, and in particular, the second quarter has been very, very strong for the company. As a matter of fact, Q2 and indeed H1 is the strongest in the recent history of Jenoptik. We can show and demonstrate and post record figures for both order intake and revenue and in particular, a very significant increase in our profitability. Second quarter has seen rising demand really across the board and in almost all of our businesses. In the second quarter, we have almost doubled the order intake of the group. With EUR 213.3 million, revenues also clearly exceeded prior year levels and grew versus the second quarter last year by almost 30%. We've seen significantly improved profitability, as I already pointed out to an EBITDA margin of now 25.2% in the second quarter. That does include a one-off effect of EUR 16 million caused by an effect in the acquisition of TRIOPTICS, and we're going to explain that in a bit more detail in a minute. Overall, as I said, first half has seen significant rise of demand, surge of demand in many, many businesses and many, many marketplaces. Not only in semicon, everybody is talking about semicon and obviously, we benefit big time from the surge in semicon, but also in our other businesses. We've seen the demand in our biophotonics business coming back big time. We've seen new orders in our Automotive, Light & Production business. We have a strong order intake in Life & Safety, our Traffic Solutions business. So across the board, really very pleased with how the market has been developing, and quite frankly, how our businesses reacted and responded to the market development and the fact that we could capture a lot of orders and grow sales as a result of that. On Page #5, we've put together a list of sort of highlights and major steps that have been taken in the last 6 months. Before I go there, though, I would like to point out that the sort of the foundation for success this year actually has been late, if you want, in 2020, last year. Last year, we went through a crisis. It has been, yes, almost like unseen before since World War II, as they say, and I think the steps and the measures we've taken last year have been instrumental in success of the company this year. In the last 6 months, we've significantly strengthened again our financial power, boosted our financial power with a debenture bond of EUR 400 million. And for us, as management of the company, it's very important to note, we have linked that to certain ESG criteria. We do want to make our company more sustainable in many ways. We do want to contribute to a sustainable way of doing business, and we want to be measured by that. And we are committed to be measured by that. We're committed to be measured by how we help, pleased to make this world a better place. So financial power boosted with a significant ESG component. We have delivered on our promises to make Jenoptik leaner, to drive further consolidation of sites and businesses. Following the consolidation of our plants in Berlin, you might remember those of you who follow us since a while might remember that in 2020, we've actually closed 1 plant in Berlin and consolidated one of our lasers and businesses in 1 plant in Berlin. Following that, this year, we have sold a small business in Thuringia, a small business that deals with crystal growth, and we found a very good home for that business. We've also disposed of our -- part of our nonoptical process metrology for certain machining processes, in particular for the automotive industry with revenues of around EUR 7 million in 2020, and we found a new home for that business with Marposs, a company that's very well positioned in this marketplace. So as I say, we continue to deliver on our strategic promise to consolidate sites, to consolidate businesses and to make Jenoptik easier to understand and, quite frankly, also easier to manage. Very importantly, we do invest in our future. We do invest in future growth. And in May 2021, we acquired property in Dresden, Germany. We do have a site in Dresden since a long time actually, and it's a very instrumental site in our semicon business. We do produce parts for EUV lithography in this Dresden factory, and that factory has completely grown out of space. So we have acquired a site there, and we are committed to build a new factory in what folks call Silicon Saxony. Again, it's not a new business for us. It's an investment into our capacity and capabilities to deliver on the requirements of our customer, 1 single customer, in particular, that's instrumental in EUV lithography. So a very important investment into our future. So a lot happened in the last 6 months. And I did point to the foundations that we've laid last year. And one of the most important steps we've taken last year was actually the acquisition of TRIOPTICS. I guess when we announced the acquisition of TRIOPTICS in the middle of the crisis triggered by COVID-19, some folks might have been a bit surprised that we were sort of brave enough to manage an acquisition, the largest acquisition that Jenoptik has done in the recent history, and we've committed a lot of money to that business. We're now benefiting from it. We're now earning, if you want, or picking the fruits of and taking the harvest of that investment. TRIOPTICS, as you know, really is producing the gold standard when it comes to measurement and testing of optics for mobile devices and thus benefits big time from the digitization of our world. And TRIOPTICS is indeed a growth driver for us in Jenoptik. We foresee and forecast TRIOPTICS to grow by at least 20% in 2021 compared to 2020. And to produce an EBITDA margin which is clearly above group average. TRIOPTICS has contributed almost EUR 50 million already -- of order intake already in the first half of this year, and we see that to accelerate in the second half and around EUR 41 million in sales in the first half of this year TRIOPTICS has contributed to the group's figures. And again, we do see that to accelerate in the second half of the year. So we are very pleased with how TRIOPTICS develops. Nevertheless, you will remember, those of you at least who follow us, you will remember that we have negotiated a significant earnout and bonus [indiscernible] component into the second tranche of TRIOPTICS and very steep earnout profile to be achieved in 2021. And yes, although TRIOPTICS will grow very nicely and contribute a lot to our profit and to our growth, we now foresee that due to operational issues that we'll have a hard time to achieve that very steep earn-out target, and we can get a positive EBITDA boost from that, which we booked in the second quarter. With that said, let me hand over to Hans-Dieter, who is going to explain the numbers in more detail.

Yes. Thank you very much, Stefan, and hello to everybody in the call. Please follow me on Page #8. Here, you see our KPIs a little bit ahead the order intake and the order backlog figure. And as already mentioned from Stefan, you see on the order intake side, a huge increase of more than 50%, 52.2%, ending up at EUR 508.4 million after the first 6 months in this year, including EUR 49.1 million first consolidation impact of TRIOPTICS, but even under -- with consideration of this impact, it's still a high growth increase on the order intake side. And it's driven by all photonics businesses. Stefan will explain to you our divisional development later on. But I can already state that all divisions showed a strong increase on the order intake side with the exception of VINCORION, which is our mechatronical business. There we had some projects postponed on the one side and on the other side, it's still a little bit difficult business circumstances around aviation business in these days. So all in all, in Q2 alone -- stand-alone, our order intake almost doubled compared to Q2 2020 and our book-to-bill grew up to 1.31 compared to 1.02 last year at the same time. And if you then look on the right side, you see the order backlog. As an outcome, it's also strongly higher than at the year-end 2020. So with EUR 586 million, 27.4% above the year-end. In both figures, you see TRIOPTICS because we consolidated TRIOPTICS already starting at the end of September 2020. So in the EUR 460 million, it's EUR 27 million. In the EUR 586 million, it's EUR 36 million. So it's an increase of 30% in order backlog at TRIOPTICS as well. All in all, we think that we can convert 67.5% of the EUR 586 million order backlog to revenue in this year, which also underlines our further growth in the months and the quarters to come. If we then go to the next slide, you see our revenue development split throughout the quarter and accumulated for the first 6 months, EUR 389.3 million, plus 18.3% including EUR 41 million first consolidation impact of TRIOPTICS, still even under consideration a strong growth, especially in Q2 you see this EUR 213.3 million, which is at least in the younger time all-time record for Q2 in a year for Jenoptik. And the growth is coming from the division Light & Optics, where we have not only the unorganic growth with TRIOPTICS, we also see a strong -- and Stefan will explain it later on in more detail, a strong development on the semi business -- semi side as well as biophotonics. In Light & Production, we have seen a slight 7.5% growth. So slightly starting recovery of the business there in our mainly automotive business and even VINCORION smaller growth in revenues. We see at the moment a decline in Light & Safety which is coming from delayed placement of orders and pandemic-related delays in delivery of electronic components, which we have solved in the meantime at Light & Safety. So this is why they have an ambitious target for the rest of the year. Finally, they want to end up with a growth compared on a 12-month basis. So very proud that especially in Asia/Pacific, our market rise in revenue has been significantly there. Obviously, contributed by TRIOPTICS because they have roughly 50%, 60% of the business in this region. All in all, our revenue generated a growth which is similar like last year at more than 70%, it's 74.2%. If we then come to our earnings figures, EBITDA and EBIT, you see a significant improvement in both figures. Let me explain some special impact in both figures, a little bit more in detail right now that you can have a clearer picture, more like-for-like, so to speak. In the EUR 73.7 million, which is an increase of 94.6% compared to last year at the same time, the first 6 months, we have, on the one side -- in the EBITDA, we have, on the one side, still a negative -- slightly negative impact from the purchase price allocation coming from the inventory step-up from TRIOPTICS with EUR 1.8 million. So it's a negative impact there. In the prior year, we had no negative impact anymore. And on the other side, you see that we have had in the prior year in the EBITDA, minus EUR 4.4 million coming from the structural and portfolio measurements we have taken into account in the last year. All in all, we ended up at around EUR 19 million at the year-end. But at this time, after 6 months, it has been -- minus EUR 4.4 million. So the prior year figure, operational has been higher by this. But all in all, it's a very, very strong development. And then as Stefan already explained that there is also a one-off effect of around EUR 16 million in connection with the conditional purchase price components from the acquisition of TRIOPTICS booked because our forecast shows that they will not reach the maximum earnout, so to speak. So we adjusted this a little bit. All in all, we are still very, very positive development of the TRIOPTICS business. But even if taking into account all these special impacts, our operational performance is much, much better than a year ago. Just to point this clearly out. On the EBIT side, it's even better because the negative impact of the purchase price allocation have been much higher in the first 6 months of this year, because here, we count EUR 8.9 million, the full impact of the purchase price allocation from TRIOPTICS in the first 6 months of this year and 0 in the last 6 months -- in the first 6 months of the last year. So compared to EUR 3.6 million, a clearly increase of the minus effect from the purchase price allocation that is the EBIT. But even taking this into account, we increased it very strongly. And of course, it's also boosted by the EUR 16 million, you make this clear from TRIOPTICS. But even taking this into account here also very strong organic increase there. So we are quite happy with the development on both key performance indicators for our group. If we then have a look at Page 11, where we see our P&L of the group a little bit more detail. You see a slight increase in functional costs, obviously also driven by the first consolidation impact of more than 400 colleagues at TRIOPTICS. We have had then the impact that our financial results has a little bit increased. This is clear because it's coming from our financing exercise, so to speak, around the new ESG-linked bond. And on the other side, the payback of the bridge financing, which we took into our books when we started the acquisition process of TRIOPTICS in the prior year. So all in all, a strong development in the earnings before and after taxes. And here, it's important that as you know that the EUR 16 million coming from the TRIOPTICS deal, it's not tax relevant. This is also positively influencing our earnings after taxes and therefore, also our earnings per share, which has reached already EUR 0.65 per share compared to EUR 0.18 per share, which is a strong -- very strong increase, more than 3x higher than a year ago. So all in all, we are quite happy with the development of the group even taking the special effects into account. And then the next slide shows you our picture combined the balance sheet development and the P&L and the cash flow -- free cash flow statement of our group. And here, you see that if you look at purely at the figure, we have realized a little bit lower free cash flow compared to a year ago. That has been up for 6 months, EUR 16 million compared to EUR 11.6 million in this first 6 months. But this is mainly driven and exclusively driven by the working capital increase, which we have taken into our books as it's the preparation of the very, very strong Q3 and Q4, we are anticipating for our group. And to make sure that we can deliver the promised product offering solutions to our customers, we have built up stock inventory, and we have started already to work on the projects for our customers. So mainly driven by inventory, our working capital increased, but even taking into account that we have financed our investments, it's still a very positive signal. So we have added a positive cash flow through the good performance of the first 6 months for our group, yes. This -- having said this, I would like to hand over again to Stefan Traeger, our CEO, who will guide you now through the divisional business development of our group. Thank you.

Hans-Dieter, thank you very, very much. And let's start straightaway with Light & Optics on Page #14. Our Optics business has indeed seen a very positive operating performance, and yes, record level of figures. The revenue has been driven across the board really by all businesses that we have or all markets we address within Life & Optics division. Obviously, semiconductor equipment has been a strong boost to the performance of Light & Optics. I mean everybody talks about the ship shortage and about the significant investments into that marketplace. And yes, like it's a saying, every new factory that's built around the globe to build chips, equipment is needed to fill the factory, and if equipment is needed, our optics is required. So revenues with the semiconductor equipment at a very, very high level. Indeed, what also came back with our biophotonics business, you might remember that last year, we had been a bit surprised on how strong that business declined when the crisis broke out. And equally, we're now almost a bit surprised how strong it came back. And I mean, it's obviously a nice development, but we see very strong order intake and sales in biophotonics and TRIOPTICS contributed already EUR 41 million. We do clearly experience an even stronger H2 based on the good order intake of TRIOPTICS; pointed out that already TRIOPTICS has almost EUR 50 million of order intake in the first 6 months alone. EBITDA as a result of the good operating performance as well as, obviously, the TRIOPTICS effect grew significantly. Overall, you do see the numbers on the page. We are very, very happy with how this business develops, obviously. Even if you take out the onetime effect of minus EUR 1.8 million, plus EUR 16 million, if you take out that, the EBITDA margin, which is reported at 31.5%, but even without those extraordinary effects, it would be at almost 25%. So very high margin development. Order intake grown by almost 91% in the first 6 months, sales grown by almost 49% in the first 6 months, EBITDA grown by 118.5%. So yes, very, very good performance across all figures. Let me take you to Light & Production, our Automotive business on Page 15. Light & Production, obviously, has been a business that's suffered the most last year from the crisis. And I think it's very notable how strong the recovery, in particular, in the order intake has been in the first 6 months versus granted a very small -- a very weak Q2. Q1 last year has already been strong, actually, but Q2 has been weak last year. Overall, though, if we integrate over those 2 quarters, Q1, Q2, the order intake in our Light & Production division grew by 73% to now EUR 109.6 million. Sales also grew by quite significant 7.5% to EUR 78 million. So clearly a very high book-to-bill ratio of 1.4 and as a result of the increased volume, but it's been more significantly as a result of the reduction of head count that we have had implemented last year in this business, we do see profitability rising. Last year, Light & Production division had been actually EBITDA negative in the first 6 months. This year, it is back on the positive track. We do see good growth in EBITDA margins. We do expect further positive developments in the EBITDA margins in the second half of the year. And again, let me point out that the majority of around 5% head count reduction that we had implemented in 2020 actually has been in Light & Production. So it did do a significant structural cost takeout in our Light & Production business last year as promised and indicated. If we go to Page #16, our Light & Safety division, i.e., our traffic safety business. We do see order intake growing significantly, by 54.3%. Let me remind you, this is a fairly lumpy business, typically with large tenders coming in and so on and so forth. So nevertheless, we're very, very happy with the order intake development. There is, though, a significant time lag between order intake and sales. Now that's pretty typical in this business. It takes a while on the execution side to convert orders into sales. And in particular, though here, we had problems at the beginning of the year with our supply chain, which we have been able to fix, but we do still see the effects on the sales side. Despite the very strong order intake development, sales is actually down 23.2%, which does also lead to missing volume and therefore, missing cost coverage resulting into a decline in the EBITDA margin. But let me again point out that this is a time lag. It's not if sales are lost out there, we have to execute, and we are very confident by now that we can execute in the second half and that we do see much better business and actually strong growth in the second -- strong growth actually in the second half of 2021. Last but not least, let me go to the VINCORION, Page #17. VINCORION has difficult market conditions. There's no doubt about that. The effect of the aviation prices is there Yes, we do see, like everybody else, first signs of recovery. Apparently, the amount of flights at least in North America are back on 2019 levels. But big parts of the aviation industry is still suffering from the COVID-19 crisis, and that does have an effect on VINCORION. We do see order intake declining by almost 25%. We're grateful that the business and the management of the business has been able to grow the revenue, nevertheless, by at least 2.1%, which is -- yes, it's a good result given the circumstances. It's great to see that the EBITDA margin actually expanded remarkably. So we do see better profitability as, again, a result of the cost reduction measures that we have implemented already last year. Overall, if we take it all together, again, we have seen a very, very strong H1, very strong in particular, Q2 in 2021. And I would like to again point out that we've laid the foundations for that strong performance actually last year already. We've implemented significant cost-cutting exercise -- cost-cutting measures. We consolidated sites. We structurally took cost out by reducing our head count. We got the backing by our Supervisory Board also to exercise and pull off the largest acquisition that Jenoptik has pulled off in the last years, actually in its recent history, with the acquisition of TRIOPTICS in the middle of the COVID-19 pandemic, at the time when a lot of people were saying we need to keep the cash together, we did keep the cash together in many ways. But we also did spend it where it was for growth, and we can see some harvest of that, and we can do see -- and we do see the positive effects of that investment now, which we're really, really proud of. As a result of all of that and also the very good pipeline that we have going forward, we raised our guidance in -- a few days back. We now believe that revenue will come in at between EUR 880 million and EUR 900 million. We do believe that the EBITDA margin will be between 19% and 19.5%. That does include the one-off effect which we already talked about. We do see, as I say, the effect of the restructuring measures taken in 2020 already bearing fruit, and we're very convinced that the second half will be even stronger for us. Let me take you to Page #20, though, because we believe that Jenoptik is not just a short-term interesting investment but we do believe that we are actually very well positioned for long-term further growth. There are several megatrends that drive the demand in our industry and drives the demand for more light, photonic solutions into the future, and we are well positioned to capture a lot of that additional business. There's the digitization of our world, and we all know that the growing demand for chips for various applications really is there for years to come. We do see the increasing usage of augmented and virtual reality tools, and in particular, with the acquisition of TRIOPTICS but also with our very strong microoptics and optics business in the semicon world, we are well positioned to support that digitization of our world. There is indeed a trend for more spending in health care. And with our diagnostics and bioimaging modules and components, we help large customers to capture that trend and to support that trend. And we do see good performance in our health care and life science businesses, and we foresee that to continue to be strong for foreseeable future. Smart manufacturing is needed. As I said earlier, we are committed -- we actually want to be measured by how much we can contribute to make the world a better place. And it does include not just but also in parts at least the ability to produce goods and products with less resources. And for that, smarter ways of manufacturing are required and with all technologies, we can help and support that. And there is a need for mobility. We all talk about the increasing need for e-mobility, for the electrification of car fleets and all of that. We benefit from that, but not just from the electrification of car fleets, but also from the rise of more smarter ways of mobility or smarter infrastructure, we can capture business from that. We can capture growth and profitability from that. So therefore, we believe that, yes, we do have a record-breaking Q2, a record-breaking H1. We believe we will have a record-breaking 2021. But I think even more importantly, we are well positioned for future growth and margin expansion for the years to come. With that said, let me pause here, and we're very much looking forward to receiving your questions. Thank you very much.

[Operator Instructions] And the first question comes from Craig Abbott, Kepler Cheuvreux.

I'll just -- I'll turn off with a couple of questions, please. First was just on the material cost inflation outlook in general for the group. We're hearing basically from every manufacturing firm about supply chain tightness and digital supply chain disruptions. You mentioned you had resolved the supply disruption issue in Light & Safety and didn't mention any other particular factors looking ahead. Could you maybe just shed some light here? Do you have good visibility on how you can pass on higher input costs? Or if you could update us here would be very helpful. And then just briefly on Light & Safety to follow-up there. You mentioned you had resolved this issue. I mean did you just simply exchange suppliers or -- that would be one question on that. And secondly, did you lose any orders during that time, i.e., market share? Or was this an issue that's sort of impacted your peers as well?

Thank you very much for those questions. I mean as a matter of fact, it's basically 1 question bundled together, I would say. Well, I'll try to answer it in a broader sense, actually. So on the material costs, yes, of course, we do see costs -- we foresee the cost to rise over the months, like we all read everywhere. I think we've discussed that last time already. We have -- typically have long-term contracts both with our suppliers as well as with our customers. So in both ways, it takes us a while until it flashes into our P&L. We do foresee costs to our suppliers to increase, in particular, in the second half. I haven't seen much effect in the first half, but I think the more it sort of goes on, the more we will see an effect there. By the way, we would think that -- personally at least we think -- I believe that these issues are going to be with us definitely for the remainder of this year and maybe for the first half of next year even. And equally, we do have long-term contracts with our customers. So we can't just pass it on as it rises. But over time, of course, we try to always raise prices. So no short-term effect. What I will say changed a bit compared to the beginning of the year, at the beginning of the year, we had particular problems, like they're I say isolated issues, which were though very significant. We talked about this one particular problem that we had in Light & Safety. And to include your second question, basically in the answer, we just worked with that particular supplier on a technological problem that supplier had, we still get this from the same supplier. And together and jointly, we've solved the technical problems. But we have a number of those sort of bigger events, I would say that by now, we don't -- we have those bigger issues under control much better than in the beginning of the year, but we have more noise, if you want. So overall, the pressure is rising. It's like the tide is rising, but we don't have bigger waves, if that makes any sense. So the same effect, but not in isolated bigger events, but smaller, but spread out in a most better way. I hope that kind of answers your question. Everybody talks about challenges in electronics and god knows what. But on the other hand, of course, our supply chain group, our purchasing group is better prepared now than the beginning of the year in the discussions with our customers and suppliers.

And Stefan, maybe I can support you with one, I think, not important sentence that all these happening to you just is quite very, very good. it's already priced in our guidance for '21. Yes, just let me highlight this. It should be no negative impact coming to our figures in this year anymore. Yes, just to point out. Yes.

Yes. Good point.

Okay. It's very helpful. Just on the open question still on Light & Safety. During that time, do you feel like you lost any market share, traction or do you...

No, I don't think. No, no. It's been -- so isolated -- significant but isolated. No, I don't think we've lost any market share there. Didn't have an impact on our order intake.

And the next question comes from Stefan Maichl, LBBW.

Stefan Maichl from LBBW. Also a couple of questions from my side. The first one is on Light & Safety. If I understood you right, you guided for sales growth for the full year for this division, which might imply over 20% growth in the second half. Might this growth reach the 5% to 9% outlook provided with the full year figures 2020 for 2021? Or is it less?

I think you're right. We guided for sales growth for this particular division, which does indeed imply a very strong second half. I can confirm that.

Not more. On the sales growth, it could be over 1%, 1% or 5% depending on your, yes, project execution?

Correct. I think it's going to be -- given that we need to produce, ship, install, well, things and all of those executional things, I think it's probably a -- we're saying low single-digit figure. We don't say growth. Yes, we're going to see until the end of the year.

I would say something between 1% and 5%.

And the rest might actually spill into 2022 then.

But Stefan advised the strong increase in sales in the second half is to be -- our forecasting.

Okay. The second one is on VINCORION. VINCORION has showed only a strong margin improvement in the first half despite only 2% sales growth probably. And you mentioned cost reduction, but the second point might be a product mix effect with less aviation business. Now we have seen Airbus might increase deliveries in the second half. Should that change that mix and therefore, put some pressure on the margin in the second half. And the question is, could you keep that margin over 10%, 10%, 11% in the full year 2021?

Yes. That's a very good question. I think first of all, you're right, there is also a mix effect. There is a significant cost takeout effect, but there's also a mix effect. So you're absolutely right. If aviation comes back, will that put pressure on the percentage margin? Maybe. But then on the other hand, if aviation comes back, volume goes up as well. So that's the counter effect of the mix effect and it becomes...

And Stefan, it's worth to mention, [indiscernible] which is higher-margin business.

It's higher-margin business. So it's a bit difficult to put a number on it, but I think we will see good margins for VINCORION. But yes, maybe more sort of on a steady state sort of flat where it is at the moment. And we have to see how it ends up at the end of the year. But as I say, there are 2 effects. Yes, there is a mix effect and there's a volume effect. And if we get more aviation business going forward, mix effect -- or mix is a bit less favorable. On the other hand, if it's more service, then the mix becomes more -- becomes richer, basically. And if we get more volume, we have better overhead coverage. So it's probably going to be a sort of a wash.

Then the 10% could be likely with that wash for the full year?

Well, we're -- as you know, midyear, we hesitate to guide on margins for particular businesses, but maybe it's a bit higher than what you just mentioned. But that shouldn't be seen as any guidance in any way, shape or form.

Okay. Understood. Then looking ahead to next year, you have guided on some quarters ago, 16% EBITDA margin for 2021. Now taking together all your different comments for this year, even if you take out the EUR 6 million TRIOPTICS onetime effect, you might end up at around 17%, still above your 2022 target. So when might you think about to -- not to change or to make it more visible for us, which margin might be for 2022?

Yes, absolutely a fair question. Look, I mean, we communicated our strategic plan for the strategic period going until 2022, years back, obviously. And at the time, I did say -- you might remember that, I did say I don't like this guidance through the cycle or above the cycle or below the cycle and I said at the time, whatever the cycle is going to be, we promise a bit more than 16% EBITDA margin. Now you're right, we will deliver on that promise a year earlier despite the fact that we did have a significant crisis. And we are currently working on our strategic plan for the next strategic period, which actually starts next year, but we will pull this forward a bit because, obviously, if we would say that next year, we might reach 16%, that would be quite a disappointment, I think. So we're working on that. We will combine that with a new long-term outlook, which we intend to communicate later this year towards the end of the year. And we already, I think, have at least penciled in some time for a Capital Markets Day. Yes, towards the end of the year. And if I would be following Jenoptik, and I would come to the Capital Markets Day in 2021, I wouldn't get a more long-term strategic outlook, I would be disappointed, let's say. So please -- I mean please do understand and bear with us. I mean we would rather want to come with a substantiated 2022 figure and a long-term outlook than just shoot from the hip here at this moment. But what I can say is that, I mean, look, I mean -- I don't think we will say 16% for 2022. That would be a disappointing. So yes.

That would be indeed. And then some housekeeping question. You have booked in the first half about EUR 15 million of PPA on an EBIT -- EUR 9 million PPA on an EBIT level. For the full year, you have given out the guidance of EUR 15 million, 1-5. Is this guidance still valid?

Yes. Yes.

Yes?

Yes.

Okay. Next one on tax rate. It was rather low in the first half due to the...

The point -- Stefan, the point is that you cannot calculate times 2 is because the one-off, the inventory step-up is gone now for the year. So the EUR 1.8 million is not EUR 3.6 million for the year. It's just EUR 1.8 million for the whole year, yes. This is why it's not -- you can take it...

PPA is like -- in EBITDA, it's gone by the end of February. But in EBIT, obviously...

It's also gone for the future, but it's even also now. So this is what I wanted to explain. This is why you cannot say point something times 2 is the right figure. This is why it will end up at EUR 15.5 million, I think is the right -- EUR 15.3 million. Yes. It's our -- at least our estimate or calculation. Yes.

Okay. Then on tax rate, it was rather low in the first half at 12% due to the onetime of TRIOPTICS. What should we expect for the full year on a P&L level?

Yes. And this year it's probably -- our estimation right now is not too easy to do a tax calculation because of the tougher tax issues. But I talked to our head of taxes because I wanted to be prepared for the question. We are assuming around 15% in this year because this one-off effect is also there for the whole year, and it's not tax relevant. But it will increase in the years to come. So the 15 years -- excuse me, the 15% is the last time we see 15%, we are prognosing or forecasting for the next year is step-by-step increasing tax rate, and it's still valid part.

Okay. And my last question is on divestments. We have done some in July. Should we expect any onetime issues from these divestments and a further short-term M&A activities likely?

Yes. I mean, the divestments we've done are important, but I would say it's not as if -- we do get a bit of a gain -- value gain.

We will book it in Q3 because it was after the 30th of June.

The cash flow comes also in...

Yes. Cash flow -- cash payments, we already received partially in July. We will collect the whole money probably in the whole Q3 and book our impact in the P&L, and we will have book gains -- book value gains, slightly some book value gains. Not really a big amount. Yes, not comparable with the one-off of TRIOPTICS, for example, but we will gain some book value.

And your question -- sorry, go ahead.

No, no. The cash, is it double-digit or single-digit million?

Well, I think what and -- it's not at the same amount or level of the TRIOPTICS onetime effect. And it's not single, so it's somewhere between. It's a single-million figure -- single-digit million figure.

And further divestments? Yes?

Further divestments, which point, I guess, towards what's status of the discussions around VINCORION. And as always, I mean, we are in discussions with interested parties. We always have been in discussions with interested parties. At this moment, none of these discussions represent the status in which it is more likely than not because otherwise, we would have booked it under IFRS 5 as hold for sale. So at this moment, the discussions that we are -- we have been in and we are in are not at that status, but we continue to talk. And at this point in time, I can't disclose any more details.

And the next question comes from Malte Schaumann, Warburg Research.

My first question is on gross margins. I saw -- I think the gross margin was below 32% in the first half exclude the one-off. Then it's still 32.4% something. Actually, that's the lowest gross margin for a 6-month period in the past 5 to 10 years. [indiscernible], they've had pretty high revenue share of semiconductors in Light & Optics business. So it puzzles me a bit what really is keeping gross margins down? I mean you said that you did not really see cost increases come through that might come in the future. So now you can add some more color on that line. And then provide some more thoughts how that should then develop going forward, if there will be some catch-up effect in the second half and maybe some midterm views. I mean initially, the idea was coming from to 35% to further expand margins to the higher 30s level now at 32% in the first half. Yes, that's quite a difference.

Yes. I mean there is -- when it comes to gross margin, we do have significant mix effects in the business. The more we do, for example, in Light & Production, automation integration, we've higher gross margins. And therefore -- sorry, lower gross margins, but less tax and still good EBITDA margins due to the -- basically the business set up there, a lot of purchased goods that we mark up and then sell to a lot of third-party items included. So typically, mix effect, I'd say and then we had a PPA effect which is significant.

And in the beginning of the year, in the first 6 months of this year, Stefan Light & Safety has been under pressure, and you have mentioned it, the reasons. We will have a stronger Q3 and Q4. This will improve our gross margin. But the gross margin in Light & Safety was relatively weak in the first 6 months.

So again, a mixed pack of reasons, mix effects. Typically, Light & Safety is a gross margin-rich business with a lot of OpEx and if we have less Light & Safety, but more, say, Light & Production, for example, or even Light & Optics, we have in average for the group net gross margin, yet less OpEx percentage of sales leads to higher EBITDA margin.

Okay. So with the catch-up in Light & Safety in the second half, you would expect gross margins also to recover? And would you foresee kind of an increase, a lot of flattish gross margin development this year in comparison to last year?

I think in the same region, yes. Flattish. Yes. No increase.

And traditional margin in our gross margin, you see the operational cost of our business. You see the fabs people working in the fabs. Our production is more expensive maybe than in machine business -- regions, yes. But therefore, we don't have higher OpEx later on. This is why we have higher EBITDA margin. Yes.

No. OpEx was quite good. Okay. Then the next question is on CapEx. You recently acquired the real estate in Dresden for the new site. Should we expect over the next years kind of inflated or higher CapEx levels? Or is that then kind of the normal ups and downs you would expect every year?

Yes. Yes. Well, Malte, it's a good question. By the way, it's a very good question, and we balance this out the financial needs and the free cash flow, we need to finance our investments there. But this big project will last over a period of 1 year. So the building, the construction of the factory will last 1.5, 2 years because it's the highest category of clean room which is on the market. And this is not technical and construction wise, not so easy to build up. But yes, you are right, probably under the line, we will slightly increase our investment levels all in all, over the years to come. I think it's also part of our strategic exercise right now. So we will communicate about this planning then at the Capital Markets Day when we present our ideas to all of you. But yes, you can already assume that they will slightly increase because our company, our group is now starting a growth period and we have to follow this with investments in our core businesses around the world. Yes? And it's around the world, yes. So it's not only in Dresden. We are also starting here in Jena to -- investments in production and R&D center, so to speak, but also in Americas, you will see higher investments in U.S. and probably also in Asia. So all in all, yes, you are right, you will see an increase in investment, but it's not every year double. It's not doubling every year. That's not. Yes.

And we're mindful. We will be careful, but we do foresee investments to go up to finance the growth that we anticipate and plan.

Yes. And therefore, we will keep an eye on our ROCE development, our return on capital employed. This figure will be more and more important in the next strategic period because we are investing so much money now in the purchasing of companies and in the investment in our business, yes.

Okay. And on the other -- I mean, you're investing quite a lot of money, I guess. And when you're making a long-term commitment for your main customers, especially for your main customer, do you get a return kind of a long-term commitment and assurance for them that will last maybe over the next couple of years regarding, yes, like the orders, business, et cetera?

We typically have long-term contracts, in particular with that business and with that customer. We have long-term frame contracts. And let me also point out that in particular, the investment in Dresden is for EUV. And for our contribution there in terms of micro structure -- nanostructured optics for those particular sensors that you know about and what we all know about. And again, it's -- I don't see any other company that is actually able to do that type of technology at that level in an industrial -- on an industrial scale. Obviously, academic institutions can do that, and the friends at Fraunhofer here in Jena would be able to do that. But I think on an industrial level, we are sole supplier for this particular technology. And it's hard for me to see that anybody can sort of pull it off out of the blue.

Makes sense. Okay. Quick last one. You announced 2 small disposals. Should we expect further disposals in the second half of the year? Or has that been mostly done now?

You refer to smaller ones or?

Half from VINCORION. Yes, yes. Half from VINCORION, the smaller ones.

Not at the moment. I think that was -- remember, when was that in November 2019 or when we had our last Capital Markets Day, we were showing this bridge of I think it totaled about EUR 40 million of business that we believed should lose over the years. There was EUR 20 million has been lost. It's already realized and then another EUR 20 million more or less is what we've realized now. So we're kind of like done with that exercise for the strategic period of disposing of businesses and cleaning up the portfolio.

And the next question comes from Richard Schramm, HSBC.

I have follow-up on VINCORION. Can you remember that you mentioned that there might be some measures necessary if the situation does not really improve? Now agreed that the margin development has improved. However, if I look to the order situation, this looks pretty worrisome and does not sound too optimistic for the quarters ahead, yes. Is there any need to adjust capacity? And should we expect, therefore, some extra costs in H2?

Yes. Good question. I mean, first of all, we do have a fairly high order backlog for the business, and we believe that we still have, yes, things to execute on, and we do believe that the orders will improve significantly. The order inflow will improve significantly in H2. Nevertheless, there is activities in terms of structural cost takeout. Some of that has been booked already in the first half. I don't think there's going to be a lot still to come in the second half from the Columbus project. But there is ongoing restructuring activities in VINCORION as well, which by the way are -- some of that we've spent already last year, but most of it is actually or some of it is for this year.

No, it's booked already. The main part is booked at the year-end and now it's realizing and the rest will come throughout the year. Yes.

Throughout the year.

So all in all, not so bad the outlook from our point of view.

Yes.

Okay. And we should not expect that there is some, let's say, big impairment also necessary for preparation for a possible divestment here?

As I said earlier, at this moment we are in discussions, but we, at this moment, are not in a position to disclose any further details.

Okay. And the other one question concerning the margin quality of the orders in the automotive business. How would you judge this? And is the backlog you have now, clearly better quality than, let's say, a quarter or 2 ago? Or is this still not the case and you have to struggle and keep a clear eye on cost reductions more?

It's getting better. What's coming in is getting better, but we have to plow through and manage through the period with very poor -- from a margin perspective, poor orders that we booked to keep the business going to fill the factory. We have to plow through that effect and manage through that effect. We think it now has richer margin components. But what we still have is fairly poor. But it should get better with -- as the time goes by.

So this sounds a bit that you are not able to be selective on the order inflow at the moment, right?

We have not been able in the last -- you were asking for like -- and I was referring to basically compared to the beginning of the year and the end of last year. So the second half of last year, in particular, in summer last year, it was really difficult. And then Q2 last year was completely lost. And then now with things getting better, we can become more selective, and we are becoming more selective, but we still have orders in the books, which, yes, we have taken in a very desperate situation in order to get work basically. But as much as we manage through it and execute through it, what we take now has a better margin quality.

And we have one follow-up question coming from Craig Abbott, Kepler Cheuvreux.

Just one last one, please, from my side. We've talked about this in past conference calls, but I think in the meantime, the boons plan for phasing out combustion engine vehicles has been accelerating for the -- since the last call. And I think it's the 'Fit for 55' program. And I just would like to know if this time line for the phase out has been accelerated further if you might then have to take further measures to again adjust your capacities down in the metrology activities and/or whether this might spark fundamental rethink in terms of whether there might be a better owner for these activities and perhaps further developing the business in other applications faster than they might be able to do better within the Jenoptik group?

Yes. Yes. Yes. We did talk about that in the past already, you're right. I mean at the moment, I think we have -- we don't see any further need for capacity reduction in this business. Frankly, we have reduced capacity quite a bit last year and beginning of this year. And at the moment, we're getting orders and we need to be able to execute. At the moment, we actually need to make sure that we still can execute the orders that we get. But I do think there is a pent-up demand effect that we see. I mean, we're not -- we don't think that we will get back to historic levels in this business. At the moment, there is a lot of -- there is some kind of demand that we do see as an order inflow, and we need to make sure that we can at least execute on those orders. But overall, to say in the short term to midterm, we don't see any further need to restructure. And your long-term question as to what extent this should be and is a core part of portfolio of Jenoptik is another question. And at the moment, I -- we do not intend to have active plans to or have even active processes to sell that business. And quite frankly, I think at the moment, it's not the right time for it. I don't see that anybody would give us any, I would say, decent price for it. If somebody would give us a decent price for it, then we will certainly talk. But at the moment, I don't see that. And I think it's our duty to look after the business and turn it around, which we are working on, and we'll have to see what the future is going to bring.

At the moment, there are no further questions.

Okay. Well then, thank you very much again for being with us today. Let me again summarize. We're, obviously, very proud of the numbers, the performance in the first half, second quarter, in particular, really record-breaking figures for Jenoptik. First half record-breaking figures for Jenoptik in the recent history. Let me point out again that this has been made possible by, yes, a very good market condition in many places, in many of our businesses, but also by the measures we've actually taken last year. I think we talked about that last year a number of times. We talked about our restructuring efforts. We did spend a significant amount of money of our shareholders in making the business better. We did spend in the middle of the crisis, a huge amount of money on acquiring a business that we do foresee to bring a lot of growth in the future. And I think those bold actions that we've taken in 2020 pay out now. And again, I'd like to thank also all the representatives on our Supervisory Board, shareholder representatives as well as workers' representatives, both sides of the aisle for backing us up last year because, I mean, it was not an easy decision last year to deploy hundreds of millions to acquire a company in the middle of COVID-19. And again, it's paying off now. We do post record-breaking figures, and I think as I said in the end of my -- of our presentation here. Yes, we have a record-breaking Q2. Yes, we have a record-breaking H1. Yes, we have or do foresee a record-breaking financial year 2021. But even more importantly, we've used the time to make the business better for the future. And we believe that we can and will capture on those long-term trends for photonics. We believe that we will grow this business for years to come and expand margins. And looking forward to also talking with you and explaining to you our long-term plans, hopefully, at the Capital Markets Day towards the end of the year. Thank you very much.