Jenoptik AG (JEN) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Jenoptik conference call regarding the financial results 2021. [Operator Instructions] The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Leslie Iltgen.

Good morning, everyone. Welcome to our conference call on the full year 2021 results. My name is Leslie Iltgen, Head of Investor Relations. And with us today are CEO, Dr. Stefan Traeger; and our CFO, Hans-Dieter Schumacher. Dr. Traeger will point you to the key highlights of our full year results and guidance for 2022. Mr. Schumacher will then cover the financials in more depth. As always, both will be happy to answer any questions you may have in our Q&A session at the end of this call. Also, let me remind you that this call will be recorded, and a replay will be available on our Investor Relations website after this call. Before I hand over, please also pay attention to our usual disclaimer that you will find in the presentation. It is now my pleasure to hand over to our CEO, Stefan Traeger. Please go ahead, Stefan.

Thank you, Leslie. Thank you very much, and a very warm welcome from our end here in Jena. And it appears to be a fairly sunny morning. We are very glad to be able to present our financials and a bit more throughout the next hour or so. I believe it is fair to say that 2021 has been a remarkable year in many ways and a year of really strong development for Jenoptik. There are lots of milestones that we can point to in the last 12 or 18 months. Let me just point out a few highlights of the last fiscal year. We managed to find a new owner for VINCORION, a deal that we're really glad we could sign at the end of the year, and we expect closing of the VINCORION sale within the next few months. We also added to the portfolio quite significantly. We almost doubled our footprint in life science and MedTech with the acquisition of BG Medical. And we managed to expand our business presence in Asia with the acquisition of SwissOptic and in particular, its facility in Wuhan, China. And later in the presentation, Hans-Dieter will point out, that our Asian business is now almost as big as a business that we do in Europe, except Germany. We've significantly invested or started investments in new capacities. Capacity is a topic that will be with us for months to come and will be like a red thread basically -- like a red line through the presentation today. We are working hard to increase and enlarge our capacity in order to fulfill the really hardly growing -- the hard growing, the much growing demand for our customers, and that's why we invest significantly in further growth. We managed to enable that, while we strengthen our financial power. We remind you on the sustainability-linked debenture bonds that we've placed within the year 2021. And later in the year, we actually discussed with many of you and presented in Capital Market Day, the next stage of our strategic agenda. The first stage of transforming Jenoptik into a focused photonics player, focused technology player, we are concentrating on focusing the company around our core competencies, technologies around optics and photonics. And in this next stage, we aim to focus even further on certain market segments, providing, from our prospective at least, sustainable growth and margin expansion. In the future, Jenoptik will spend even more for pushing what we all know as the digitization of our world. And if anything, and COVID has acted as a catalyst for that trend to ever more digitization. We will stand for the future of our health care systems and the future of how we organize mobility in our society going forward even more than we do today. We aim at this new strategy to have sales of about EUR 1.2 billion in the middle of the decade, and about 20% of that we aim to put to the bottom line as per EBITDA margin. So I believe overall, as I say, a very busy year 2021, lots happened in 2021. We really managed to push this company to the next level, if you want, or lots of milestones. But at the end of the day, as the saying goes, it's all about the financial success, it's all about cash, if you want, or financial success. And in that respect, I think 2021 has been remarkable and really outstanding. In 2021, we breakthrough the EUR 1 billion mark in terms of order intake. We took more than EUR 1 billion of fresh orders for the company, including VINCORION that is. And probably even more importantly, we managed to generate almost EUR 180 million of earnings before tax and depreciation, which is the highest in the company's history. So really a record year in many ways. Yes, we do live in challenging times, and that's on our minds every day. We know that there is a conflict of war not too far away from here and it has an impact. It has an impact on our business to a certain extent, not that much, actually, as you might see it in the very first slide, but we will detail that a bit more going forward. So yes, we do live in uncertain times. But we also know that we have record-breaking order intake. We have an order book that goes through the roof. Our challenge is to convert all of those into sales at the moment, and we work hard to invest to make that happen into [ native ] product growth. And we will detail that with our guidance at the end of the presentation. So in summary, fantastic year 2021, and we're now going to lead you through the original numbers in a bit more detail, and Hans-Dieter is going to take that part.

Yes. Thank you so much, Stefan, and good morning to all of you from my end as well. Please follow me on the next Slide #6. Here, you see our key performance indicators looking more in the future of the order intake and especially the order backlog. And here, you see the figures for the continued operations. So the increase in order intake of roughly around about 58%, 57.6% to EUR 936.7 million is not above EUR 1 billion because the EUR 1.0736 billion, as mentioned below the line is including -- has been including VINCORION. So this is the photonics division. And it's also a very successful development above EUR 900 million, equaling a book-to-bill ratio of 1.25 including the sales growth. So it's not a bad situation. It's a very strong development. And specially order backlog on the right side of the slide, with even more than 80% growth, 81.3%, up to EUR 543.5 million is substantially higher than a year before. And we intend to convert 85.9% of this into revenue in the year 2022, meaning this is a strong base, a strong ground for good -- and a good start in the year 2022. Having said this, you can follow me on the next slide here, you see our sales increase quarter-by-quarter. In total, we have reached EUR 750.7 million revenue for the continued businesses without VINCORION, which in sales increase -- the revenue increase of 22%. And yes, it is including a one-off of first consolidation of TRIOPTICS, which has brought around EUR 100 million in sales with us in the last year, 2021. But don't forget, we had also reported already in the Q4 or in the last months of the year 2020, around EUR 28 million. So the extra impact net comparable it's roughly about EUR 60 million, a little bit more than EUR 60 million. So a strong organic growth as well, driven by the division Light & Optics. And mainly they're the micro-optic and the biophotonics business, but Stefan will show you and go with us and you through the figures of the divisions later. A final remark, you see here the group revenue, it's nearly EUR 900 million, EUR 895.7 million. It's including VINCORION, and this is also a strong growth compared to the EUR 767.2 million we have reached a year before. Having said this, I'd like to share with you the revenue share by region. Here, you see that Asia Pacific, Stefan mentioned it already, has done a huge step forward, ending at EUR 172.9 million coming from EUR 104.9 million. So it's more or less -- a little bit below, but more or less on the level of Americas and Europe without Germany, it's much bigger in the meantime than Germany alone. And this is our strategic intention, has been always our strategic intentions, and it has obviously also to do with TRIOPTICS acquisition and first consolidation because TRIOPTICS is doing more than 50% of the businesses in Asia Pacific. So all in all, a very strong and good and healthy development in the regions. Let me name the last remark here that our top 3 customers accounted for 21.4% of revenue compared to 22.6% prior year. And it was always and it has been always our intention to widen our customers portfolio a little bit and not be too much depending on just 1 big customer sitting in Europe, not so far from Germany, you all may know whom I have in mind. So we did the progress on this journey. And we think this is now a much more balanced portfolio, giving us opportunities around the globe, around the world. Then on the next slide, you will see our profitability, key performance indicators, naming EBITDA and EBIT. Here you see also a strong improvement compared to prior year, 67.9% increase in EBITDA for the continuing businesses from EUR 92.8 million to EUR 155.7 million. And yes, it's including a one-off of -- coming from the conditional purchase price components from the 2 acquisitions we have done in 2020 and early '21. It has been TRIOPTICS and INTEROB. In total, it's EUR 30.5 million. So including this one-off with the EUR 155.7 million, our EBITDA margin has reached 20.7%. Taking them out as one-offs, it's still 16.7%, which is clearly above prior year of 15.1%. We have, by the way, so to speak, in our earnings booked, especially transaction costs and other costs in the amount of EUR 7.5 million. So it's also booked. The purchase price allocation for inventory step-up in the EBITDA has reached EUR 2.1 million. Prior year it has been minus EUR 4.6 million. And the EBIT on the right side, the PPA effect has been raising -- have been raised a little bit. It's now at the level of EUR 16.4 million compared to EUR 14.9 million prior year. But the EBIT nevertheless has even more improved than the EBITDA with 128.2% increased to EUR 108.1 million. This is also an all-time high figure in the history of Jenoptik Group. Yes, it's also including the one-offs, but the margin was 14.4% compared to 7.7% is really strong. And it shows how successful we also have been financially in the prior year. Having said this, I'd like to share on the next slide a little bit deeper insight into our P&L structure. And you see here the gross margin, which is below prior year, driven by higher material and personnel costs and expenses. On the other side, the functional costs, including the first consolidation impact of the people which have joined us throughout the year coming from TRIOPTICS, INTEROB and special Berliner Glas Medical and SwissOptic, which we had included in our figures in the month of December already last year. And you see in the operational results, by the way, the EUR 30.5 million extraordinary one-off positive effects coming from the conditional purchase price components, as I already mentioned. So ending up in the earnings before tax of EUR 102.5 million on earnings after taxes of EUR 84.3 million equaling to an EPS earnings per share of EUR 1.43. We should not forget to mention that this relatively low tax rate is coming to -- coming from a regional profit distribution, much lower tax rates outside of Germany and the huge tax-neutral income of EUR 30.5 million, which is not tax relevant. The cash effective tax rate is 13.3% compared to 19.6%. And that we make a statement at this point already -- now we have activated nearly all carryforward losses. This means in the future, the tax rate of the group of the company will increase. So all in all, also here in the detailed P&L, a strong and positive development. And on the cash flow statement on the next slide, you see that -- we did invest in working capital, yes. And we did invest more in capital expenditure, so to speak. But all in all, we managed to increase sales by 22% and having a free cash flow on the same level and including an increasing investment. And because of supply chain and inventory issues, we took some puts on stock. So all in all, we are very happy that we managed it to end the year with a free cash flow before interest and taxes as a group, including VINCORION of -- at a level of EUR 62.8 million, which is the same nearly the same as a year ago. And let me make a statement that Berliner Glas and SwissOptic, we did include only pro rata in revenue because we did consolidated throughout the month of December, so 1 month sales and profit but a full year on the balance sheet side. So this is also a special impact in the consolidation process last year. Having said this, I'd like to hand over again to our CEO, to Stefan Traeger, who will take us to the journey throughout the divisions. Stefan?

Yes. Thank you, Hans-Dieter. And as always, let's start with Light & Optics on Page #13. Light & Optics is, I mean it's almost outstanding, it's in a remarkable position. All markets are pulling hard. All our customers are pulling hard. Customers want and need more product. And we do all we can, and we invest a lot into further capacity. There is a very strong growth in the semiconductor equipment industry. It goes without saying that all the investments in this industry basically and the new demand for our products. But it's not just the semiconductor industry. We see a very good contribution from the optics, from the electronics parts, biophotonics, medical and life sciences, industrial, all market segments, as I say, are pulling really hard, our customers are pulling really hard for more products for Light & Optics. That's what we saw last year and what we continue to see in the beginning of this year, by the way. And it reflects in an order intake of EUR 631.1 million in 2021, which is a huge increase versus prior year of almost 84%. Revenue has been at EUR 460.7 million, still a very strong growth rate on the sales side versus 2020. And of course, as a result of that, the profitability in this division is increasing sharply. EBITDA margin is at almost 30% of sales. Now there is a onetime effect in it. We've talked about it towards the entire year. But even if you dial out that one-timer, we still see a very significant margin step-up in margin expansion in our Light & Optics business. If we would exclude the onetime effects on the TRIOPTICS acquisition, margins would still be around 24%, so a very, very strong margin development. And with that comes also a very strong free cash flow. I guess the one thing to point out is the order backlog, the order backlog with a book-to-bill of 1.37. The order backlog grew to almost the same level as sales in the year 2021, which does point out that our challenge in this business is certainly not demand from the marketplace. The challenge is, the limitations that we see in converting orders into sales, limitations in capacity, limitations in people, and that's why we invest. That's why we invest into further growth, so that we can expand our abilities to convert that huge demand from our customers into more sales in our end. For example, we just now decided to double the incentives that we give to our associates for referrals. So if our associates bring us additional people, we'll give them a little incentive, and we increased those type of activities to get onboard new experts, new people, new capacity so we can hopefully fulfill the demand of our customers quicker in the future. So Light & Optics is in a very remarkable position, outstanding market development across the board really with record-breaking order intake, fantastic sales growth and the very strong margin development. Let's go to Light & Production, on Page #14. Light & Production has experienced a very rough year 2020. And to some extent, the business came back stronger than in 2020. In 2021, the order intake grew by 20% or a bit more than 20% actually to EUR 185.3 million. It goes without saying that the automotive industry is not the easiest industry at the moment. There are challenges, challenging environments, choppy waters in this industry. Nevertheless, we're glad to see that at least the order intake has been expanding significantly. Revenue is just a tad above prior year, and with that comes an increase in EBITDA margin. Yes, there are onetime effects in it. So if we would dial that back out, essentially, revenue is flat and margin is flat versus prior year. You do see that there is a negative cash flow in this business, which is to do with investments that we do in order to fulfill the amounts of our customers. And hopefully, we can turn that into positive cash flow and positive sales in 2022. Let's go to Light & Safety. Light & Safety is in a fairly stable environment. Order intake is up though big time by 26.2% versus prior year, which is great. Revenue is lagging behind. You will remember this, if you follow us a bit longer, you will remember that we had an effect in the first and to some extent also in the second quarter last year, H1 2021 has been characterized by delivery problems from a very particular, very important supplier of this division. Now we fixed these problems in the second quarter of 2021. And Light & Safety managed to catch up quite a bit revenue that they were lagging behind in the first half, not quite to last year's level, but almost to last year's level. So in principle, not a problem from a demand perspective, demand is strong, but it took a while to catch up the effect from the first half in Q3 and Q4. As a result, the margin is somewhat down, somewhat under pressure due to, I say, the missing volume and of course, to some extent, the higher costs that we all have. Overall though, Light & Safety is in a fairly good condition. Last year, and we talked about that earlier, we communicated a new strategy to the capital markets, strategy in which we to continue our journey to transform Jenoptik into a global photonics player with increased focus on future growth markets, namely we want to play a significant role in pushing forward the digitization of our world. We want to play a significant role in the future of the Internet. We want to shape the future of -- help shaping the future of our life science and health care systems, and want to contribute to smarter mobility around the globe. And with that new strategy, we also communicated that we are going to merge Light & Optics and Light & Production into a 1 strong photonics entity called Advanced Photonic Solutions. By the same token, transform Light & Safety into a Smart Mobility division. And we are going to carve out certain businesses of Light & Production, namely Prodomax, INTEROB and parts of our industrial metrology business, namely Hommel-Etamic and we will run these companies a bit more independent under their brand name. The new structure will be reflected in the reporting going forward from beginning of Q1 onwards. So today, it's all about the old structure still, but we're in the midst of converting it. And when we communicate our Q1 numbers, we are going to convert those, and we are going to communicate our Q1 numbers in the new structure. And we are going to provide you ample opportunities to transform numbers and to make sure that you have enough backdrop and background to understand how these numbers come together. So we'll help you with translating your models into the new structure. So with that said, let's say, 2021 is history, has been a very successful year for the company in many ways. I think we managed to reach a lot of milestones in the transformation of Jenoptik. The sale of VINCORION, the acquisition of Berliner Glas, new strategy that should pave the way for further growth and margin expansion until the middle of the decade and further strengthening our financial resources, lots of things happened. And at the end of the day, I think financially, it's been a very successful and really record-breaking year for the company. Time now to look ahead and to try to understand what the future might bring. And I would admit that with all the uncertainties that we see in this world, giving an outlook is bit of a risky endeavor at the moment. So we were kind of like thinking hard what could an outlook be that, on the one hand, reflects the risks that we all see in the world, on the uncertainties that we all see in the world; on the other hand, also reflects a huge order backlog and a huge demand that we see in our business. As I said earlier, our problem is not getting orders from customers, our problem is converting orders into sales. And before I go into the specifics of our guidance, I'd like to say a few words about the effect of the conflict and the war between Russia and the Ukraine. From today's perspective, Jenoptik is almost not affected. We have very little really neglectable business in the area, really very neglectable, just small contribution. So from a top line perspective, we should be almost not affected by sanctions being in place. The first analysis of our supply chain has shown us and demonstrated us that we are fairly resilient there as well. Directly -- or direct materials or stuff that we get from Russia or Belorussia or Ukraine, again it's fairly little. There is some parts that we have to find new sources for new suppliers for, but really it's not a huge issue for us. What is challenging for us and not easy to forecast is to what extent rising costs for energy might actually infect our suppliers. We need a lot of glass. And in order to build glass, you need energy. And to what extent that affects the ability of our suppliers, that's the big unknown in our end. The other unknown that we see or the other uncertainty that we see is, of course, rising inflation, rising cost, labor cost and those type of stuff, and logistical challenges for not being able to travel to Asia, for example. We all heard the news today that Shanghai is going under lockdown again. So with all those in mind, a fantastic order backlog, fantastic demand, actually a demand of our customers that we struggled to cope with, on the other hand, a lot of uncertainties that we have in our world, from a political perspective and from a geopolitical perspective, and the ongoing uncertainties about the pandemic, we came to the conclusion that the best forecast we could give at this moment is to say that we expect our business to grow by at least 20%. Could it be more? Yes, of course. If the uncertainty settles and if the dust settles and we see that things pan out a bit more positive than it might seem to be the case at the moment, then we were certainly prepared to grow more. But at this very moment, we think that a growth forecast of at least 20% is the best forecast that we can give, given the uncertainties in circumstances. By the way, that would translate into at least mid-single-digit sales growth, if we would exclude the acquisitions of Berliner Glas and SwissOptic. We also said that on the margin side, we expect a significant margin step-up for the year, driven by further growth on top line and a more richer margin -- margin-wise a richer mix in the business. So further growth in our semiconductor and electronics business should push up margins. On the other hand, of course, we all know that there is cost pressure and there will be cost pressure in our supply chain and also in our labor costs. And from that perspective, we also said, given all the uncertainties, the best outlook we can give at this moment is that we expect margins to expand to approximately 18% of sales from a 16.7% in 2021. Again, let me point out that this outlook is based in particular, and I read this because it's very, very important: In good order situation, well-filled pipeline, as well as ongoing promising developments in the core of the photonics business in particular in the semiconductor segment. However, there are -- it also presupposes that the Ukraine conflict with all the sanctions that have been implemented and the potential impact on price developments in our supply chain, does not escalate further. Uncertainties also exist with regard to the development of the COVID-19 pandemic at this point with the development in China, just recently, just as of today, and, of course, continuing supply bottlenecks. Although we are, at this moment, confident to be able to manage it. So I'll say it one more time. The outlook that we gave was all the uncertainties in the world is based on what we know today. Could it be more? Yes, it could, if things turn out to be more positive from a geopolitical perspective, we expect our business to grow at least 20%, including the acquisitions in 2022, and we expect margins to expand from 16.7% to approximately 18% in the year. In the long term, our goal remains. We stand firm behind our strategic targets that we just communicated last fall. We want Jenoptik to focus on our core markets, semicon and electronics, medical and mobility, and we want to drive further growth and margin expansion. We believe that by 2025, by the middle of the decade, we can achieve about EUR 1.2 billion in sales, and we can put about 20% of that to the operating profit EBITDA margins. With that said, thank you very much for being with us today, and we're more than happy to answer any questions that you I bet will ask.

[Operator Instructions] And we do have the first question from Richard Schramm.

Small ones from my side. First, the decision to keep your payout dividend stable, is this an indication that reducing debt is a high priority on your list here going forward to get again a bit more room to maneuver for possible further M&A? That would be my first question.

Simple answer, yes.

Okay. And then I was surprised just to see discontinued operation, negative contribution. So what's behind this? And as we have still a couple of months, obviously, including in the current year as well for VINCORION, what should we expect here for this year before this is excluded then from the accounts?

I think VINCORION this year is already reported as an IFRS 5 -- under the IFRS 5 rule. But I think Hans-Dieter, you can maybe put a bit more -- shine a bit more light on that.

Yes, of course, I can. Yes. And then the -- this means follows to the conclusion that we had to book all the impacts which are going with IFRS 5 already in the fiscal year and 2021, meaning you can see VINCORION in the P&L only in the bottom line in the earnings after taxes, yes. In this case, and this is what you mentioned too, Richard, negative result. And this is related to the fact that we sold VINCORION a little bit below our book value, yes. So I think the total sum, the amount -- the net amount is around EUR 8.5 million, and this is the result. And we are looking in the year 2022 with the assumption -- and it's depending how fast the closing will be realized. And what we can say until today is that everything is going well in the right direction. The authorities in Germany and outside of Germany are looking at this construction and the contract with the potential buyer. And we can't see any dip ups at the moment. It looks like going in the right direction, and we assume that in the middle of the year, we should be able to close the transaction. And there, we would then have the earnings after taxes hopefully positive result of VINCORION positively into our books -- to book it into our books, yes. So this was a matter of fact that we had to book IFRS 5 at the fiscal year-end. We had to evaluate the selling contracts, what does it mean for book values and also for the results of the year of VINCORION and the outcome with the -- I think EUR 8.5 million negative results of VINCORION in the last year. This is what I can say, Mr. Schramm.

Okay. And just a clarification, I mean, as VINCORION is obviously also due to the allowance of the German government due to its defense activities, is that clearance already given? Or could that be a problem, especially in the current environment?

We cannot comment on the specifics of these processes. So we can say that we have not received any negative feedback at all from any of the authorities thus far, the German, but also overseas authorities that are required to give their green light. And as we said we have not received any negative feedback thus far. I mean, let's remind that the acquirer is from the U.K., and therefore, not -- it's part of the NATO alliance. So we don't see any -- any major risk here. And also from the customers that are required to give their go ahead.

Then we do have another question from Malte Schaumann.

First one was on the growth guidance. Guidance for mid-single-digit organic growth at the low end appears to be very conservative. So 2 questions around that. I mean, first is, without the current conflict, Ukraine-Russia, would you have provided different guidance? And then secondly, if everything goes down, capacity-wise, what growth your capacities could facilitate? Are we then talking about 20%, 10%, 15%, something in that range group wise? Or is it lower than that?

Yes. Thanks for the question. I mean, again, our guidance is at least 20% of the total business. That's the official guidance, I just wanted to give you an indication of what that translates into from an organic perspective. But nevertheless, it is -- 20% would correspond to around, sort of, mid-single-digit growth rates. Would we have given another guidance without the Ukraine-Russia war? No, at least not at the top line. I mean there might be impact from the Ukraine-Russia war on cost. But as I say, from a top line perspective, that -- we basically established that before the war or at least the foundations have been made before the war. No, the limitations are really capacity as you mentioned. And it's almost speculative to say how much more capacity we can build this year. What we can say is what we do to build as much capacity as possible. I mean we invest in new facilities in Dresden, but we all know that is not going to come online this year. We invest into machines which, by the way, are hard to get at the moment, because everybody invests at the moment into machines. But the biggest inhibitor for the growth is actually people. And as I say, we doubled the amount of incentives that we give for associates that can refer other people to us. We do what we can. We hire basically a lot of people at the moment, but everybody is hiring a lot of people at the moment. What could help us and what will help us, I'm very convinced during summer periods, is to have lower sickness rates. I mean at the very moment, we have -- we have still a pandemic going on, limiting our workforce there, we still have a lot of workers in quarantine and not being able to come to work. Although many people can work from home offices, you can't produce from a home office. You have to put -- in order to produce in Jenoptik, you need to come into the factory. And therefore, the pandemic still plays a role. So if the rate -- the incident rates go down a bit quicker than we have a bit more capacity, and of course, we all hope that we don't see a next to whatever wave or rising in incidence rates in the autumn time frame, all of those uncertainties we have dialed into the -- or we have to dial into the forecast. So the biggest limitation is people, and that's unfortunately the one that's the most difficult to predict and forecast.

Right. So what you then expect, okay, over the course of the year when you're adding more people then the situation eases thinking about 2023. I mean orders are not the problem, you have a record order backlog. Can you talk about execution then?

Absolutely. I mean say, we have -- in the optics arena, in the Light & Optics business, we have a backlog that almost equals the whole sales of last year. I mean, basically, that means that our factories are filled up until -- through the roof. And what we need is more people. We can build buildings, but it's -- it doesn't help us to have buildings. We need machines and it does not help us to have machines when we don't have somebody to operate it. So we do all we can to get more people to get more associates. We try to bring in associates also from other parts, not just from this region here, but we try to incentivize relocation, for example, to come to Jena, or Dresden, or Berlin, other factories. And yes, of course, if we can maintain the pace of hiring and if we can maintain the pace of building up capacity, then 2023 we should see even further growth. I don't see any decline in demand at the very moment. Of course, nobody knows what the second half of the year brings. But at the very moment, in terms of, in particular, electronics and semicon, the demand is continuously very, very strong that's the polite way of saying. Our customers are calling us almost every day, can you please produce faster and more.

And then last follow-up on that one. I mean you're guiding for declining order intake. I mean if I include Berliner Glas, SwissOptic contributions. And then you're still only guiding for a slight decline in group order intake, excluding VINCORION, that implies kind of more than EUR 100 million decline in order intake. So the pull forward effects you're seeing then -- would then amount to more than EUR 100 million. So can you shed more light on that too?

Yes. No, that's a very, very fair statement. And on the order intake side, it's even harder to forecast at the moment. I would say that at least in the next 6 months, we do not see a slowdown. But we do think that there is over ordering going on, in particular in semicon. I think what the industry believes is that the over-ordering at the moment, could be around 1/3 or so, but nobody really knows. So we're careful on that. We, in particular, based -- let's not forget that on an order intake pattern that was really, really record-breaking in 2021 already. So to some extent, we believe it will level off. But maybe in a few weeks when we see what Q1 brings, maybe that actually is old news already. At the very moment, we actually see the opposite. We actually see that the customers are asking even more for supply.

Okay. And no slowdown refers comparison then to the second half of last year? Or is it rather a year-over-year comparison of first half of last year?

Second half. But again, I hesitate to give you any further guidance or outlook on that because it's really very uncertain at the moment. All I can say is that our customers are -- well, let me put it this way: Our sales reps are afraid at the telephone rings because they know that they will be yelled at by a customers why we can't supply faster.

The next question comes from Peter Rothenaicher.

Firstly, on the not so nice thing on Light & Production. So profitability, particularly in operating terms in last year, was definitely, I would say, disappointing again. What is the trend you are seeing there on the one hand, regarding demand and then also execution and profitability.

Yes. No, I agree. I mean, obviously, a car manufacturer that doesn't produce because not having chips or cables or whatever is also very slow in ordering capacity expansion and new machines from us. On the other hand -- and the other thing is even if you have the order, our customers are fairly slow in -- yes, product acceptance tests and those type of stuff, trying to keep their cash flow together. So at the very moment, in terms of automotive industry, we do see choppy waters, and we also have cost pressure there. In terms of an outlook, I think it's even harder to guess because -- yes, it depends on the development in the automotive industry in the next few weeks, really. I mean we do have larger projects we're working on, in particular, in terms of electromobility and those type of activities or alternative engine vehicles. That's the one sector that still goes to some extent, although also that is challenging because if they don't get -- they need even more chips for their production, and that's further down. So hard to give an outlook. Your observation is correct. It's in choppy waters. It's really challenging. But importantly, we have styled this into our guidance already.

And with that, your new company structure indicates that you will sell this or think about selling these activities, at least in the medium term. Is it then fair to assume that at the current stage, it does not make sense to sell them, so you can only get a fair or acceptable price if the operating situation and profitability of these companies then improves again?

I would love to say no comment. Look, I mean, we have said that if we get inbound requests for those businesses, we would be open to talk. We do not have a structure for active sales process at this very moment. But we do get questions every now and again and have to see to what extent they are real. And yes, at the very moment to discuss selling such business, which is so much under pressure, maybe not a good point in time. On the other hand of the question, we also have is, is this automotive industry structurally getting better in the near future because, quite frankly, I think really structurally, the change in the automotive industry, the transformation in the automotive industry is pretty severe. And again, we can -- also we can spend only once, so we need to see where we invest. And we would rather invest into capacity expansion, optics and semiconductor and electronics businesses and our health care businesses, and then our mobility business than at these other companies. And I know it was a very long answer to a clear question, but I did my best to put a little bit more color on what you already said basically.

Okay. Then on BG Medical, SwissOptic, when you announced the acquisition, you gave us an outlook around EUR 130 million sales for 2022. Is this still valid in your point of view? Or might it be even higher now?

Yes and yes. It's still valid, but it might be even higher. And that's part of the discussion that we have. I mean we all know that SwissOptic has an important factory in Wuhan. And we don't know to what extent the pandemic situation, the COVID situation in China eases a bit. At the moment, it looks more like, again, we talk about lockdown in Shanghai and all those things, which is, again, why we are so, let's say, careful in our guidance here. Of course, if things develop in the positive direction, then it could be more in particular out of the Chinese factory there. And out of -- yes, full stop. I think that's what we should say. So yes, it's still valid. Yes, it could be more if -- and hopefully -- particularly, the pandemic situation eases and we don't see any further deterioration in the geopolitical situation between China and the rest of the world.

Then TRIOPTICS in terms of sales, you had a very good performance in 2021. Profitability, when you acquired the company, you mentioned at least 27% EBITDA margin. On the other hand, you did adjustment in purchase price. So -- but can you a little bit comment on profitability of TRIOPTICS.

Yes. First of all, you're right, the colleagues at TRIOPTICS did a fantastic job in -- operationally in producing and selling their products and providing -- helping the customers there. The biggest challenge they have at the moment is that a lot of their customers are actually located in -- well, they're not necessarily located in Asia, but they produce in Asia. And these machines need to get to Asia, and even more challenging, service engineers need to get to Asia. And you remember that we had this discussion last year already a number of times, we can't get our service people to the factories in Asia, in particular in China. At the moment, there is no direct flight anymore between Germany and China. I mean, who would have believed that? You can't even book a freaking flight to China. And I don't know, we were thinking about -- I don't know, what we can do to get people there. So that's an issue. And with that comes higher cost, which puts margins in TRIOPTICS under pressure, the cost that we have in the operational business really which is the main manufacturer. And we believe that we need to help our customers. We drive -- we do what we can to get a product to the customers in Asia, and if it costs money, it costs money. Some of that, we can push on some to some extent. Our, at least, larger corporate customers are actually helping us on that front, partially taking over the cost, the additional cost that we have with, for example, service engineer flying to Beijing needs to be 3 or 4 weeks in quarantine. We need to pay them double the income. Hence, we have to pay for all the hotel expenses and all of that type of stuff. So yes, that's -- I think that's what we can say.

But Stefan, we showed in your report of the divisions, EUR 25.6 million EBITDA of TRIOPTICS, in relation to EUR 99.5 million sales is still 26% EBITDA. Just to let me give the colleagues an impression that it is still highly profitable part of the business, and even in spite of this extraordinary costs and burden. I just wanted to highlight the high profitability of TRIOPTICS.

Okay. And in terms of the purchase price adjustment, is this now done? Or can we expect something else on the one or other direction also in 2022?

You mean purchase price allocation or this variable...

Both components.

The variable component is done. The earnout, and bonus and [indiscernible] is done.

And the purchase price allocation also in EBITDA. It still will be an impact in the EBIT, but not in the EBITDA. So the only impact we see in the year 2022 is coming from BG Medical and SwissOptic, where we are still undergoing the purchase price allocation together with the auditors, yes.

Okay. Then free cash flow 2022, can you give us here some flavor?

I don't think we are -- we...

Rather not.

Because it's -- with all the uncertainties at the moment, really do understand that we don't want to give any sort of guidance on that at the very moment.

And the last point, perhaps some indication about the Q1, you mentioned in terms of demand, it still looks quite good. In terms of profitability, how would you split the full year into quarters? Is it more similar trend, or yes.

There's always -- the colleagues are saying, yes, it always. Yes, however, I mean we will -- I think we will have a fairly strong Q1, to be honest, because our factories are producing whatever they can. So I think from a...

It could be a good start.

Yes. We would expect a fairly good start into the year. Actually, a very good start into the year.

Also in terms of profitability. .

Yes.

We do have another question from Richard Schramm.

Yes, a few follow-ups from my side, please. One, you mentioned the supply of glass as the one thing which, is here under stress a bit due to the higher energy prices. Can you give us an indication what is the most important material for you anyhow? Is it glass? And what portion of your material cost is accounting for? What other material components are under serious pressure at the moment from the supply side as well as from the price side? Can you give us an idea of what concerns you here at the moment, most?

I mean in the first instance, again, we're -- I mean glass is always an issue. We are not producing glass. So we're -- it's our suppliers that experienced the higher cost. And it's -- we're just saying that we would anticipate that at some point, they're trying to push these costs onto us as much as we try to push that on to our customers. We will fight back and then we'll find a compromise or something. So glass is one thing. Of course, all the electronic components, I mean, we also need cable not just -- and electronic boards and stuff. Now we use other suppliers and one funny thing or funny -- one interesting observation is that apparently, the car manufacturers are not so desperate to get cables, which they can't get from Ukraine that they look for other sources. And of course, if you're a supplier, a small supplier that up until today has supplied an optic and then all of a sudden BMW calls or whomever, and you might be susceptive. We fight back and we have to see. But I guess it's across the board. I guess, it's important to say that we do not have any significant supply from Ukraine or Russia or on those areas, but we see a potential second level mock-on effect.

Yes. But that was not really the answer to my question. I mean, what from your -- what is it, 300-something million of material supplies is, for example, for glass or for electronic components. Can you give us an idea what volumes are here at risk?

So we're not providing those details in our statements. And therefore, I can't really -- can't really answer the question here. But what I can say is the biggest risk, again, we have at the moment, because limitation to further growth is in people. And that means that inflation in wages could be significant impact. And what we could do is in a follow-up call, have further detailed discussion about particular costs for certain parts in our BOM. But again, we're not providing any details of our building materials.

Okay. Then another point you mentioned, did I get this correctly that you said in the semiconductor industry, there are estimates in the market, 1/3 of bookings could be, call it, over bookings as it's just a message to trying to get at the end of the day, at least the portion really needed by customers? Is it that high?

Well, nobody knows. I'm not -- you have a fairly bad line. It's hard to understand. Nobody really knows -- maybe it's on our end. Nobody really knows. I'm just saying that essentially the message I'm trying to get across is, even if it's as high as 1/3 of the demand is overbooking, you would still be growing through the roof, basically. I think that's what I was trying to refer to. There are lots of speculation at the moment. To what extent there is overbooking, to what extent there is additional inventory levels that we all have and everybody has. And I think different players have their different -- say, their different models. Many of that in speculation. But even if it turns out to be 1/3 in overbooking, the underlying growth is still so huge that it's not our issue to get more orders, our problem is to convert it into sales.

And you would not see the risk that you are pushed by your sales people and by your customers so hard that you also might run the risk to overshoot here a bit in your capacity buildup because this demand can abruptly come to balance, right?

[indiscernible]. That's exactly the question we all have in the industry. That's exactly the question. At this very moment, everybody would say, "You're crazy. You need to build more factories." And then we're saying, yes, but if I build a factory, it takes years until it comes online and then we might not need it anymore. Look, I mean, gosh, if only I would have a crystal ball. Nobody knows. I don't know, nobody knows. I think the message we can send is that we -- we try to balance to -- on the one hand, help our customers because they are also very desperate. So on the one hand, help our customers invest into growth on our end, invest into margin -- sorry, capacity expansion. But on the other hand, to not fall into the trap this industry has been falling into every now and again in the past. So we do a lot of measures. We take a lot of measures to improve capacity. But we also make sure -- try to make sure that we are not ending up in 2024, 2025 with excess capacity that we then have to build back.

That's good to hear then. Then a final one, a quick one on the tax rate. You mentioned that this will be normal from this year onwards, more or less, after no longer the losses carryforward are available. What would be a normal tax? Is it a 30-point something mentioned in your annual report as a kind of normal tax rate? Is it higher or is it [ normal ] figure?

At the moment, Richard, we are looking at 28%, roundabout, yes.

28%.

Next up is Lasse Stueben.

I hope you can hear me okay. Just one final one for me. Just on Light & Safety, it looks like Q4 was much better actually also in terms of the profitability in particular. Can you give us some insight on what kind of drove that? I know we've spoken about the supply chain issues in the first half of the year. So is it more of a release of those problems in Q4? And then maybe if you can also give us an idea of what to expect going forward from a margin perspective, given it's such a big focus under the new strategy, that would be useful.

Yes. In Q3, Q4, I would say, Q3 already was much stronger, and it is really the relief of this problem with which we had with 1 particular customer. There is still a -- there are still issues with cables and electronic boards and components. But overall, basically, in the second half of the year, I would say, Light & Safety was more or less back to normal, catching up from the first half. We expect that to carry over into the New Year. I mean, we have no indications of any particular problems in Light & Safety in Q1. They should have a very good Q1. And yes, there is price pressure in the supply chain at the moment. But overall, I think the margins should be around where the historic level, I would say. I mean we all know that 2020 has been particularly strong in terms of margins for Light & Safety. But -- so normalization of the H1 effect, maybe that's the best way of putting it.

And we have another question from Craig Abbott.

Yes. I was having some -- struggling to get into the queue. I just have 2 remaining questions on my side, please. One is, I appreciate that you're going to be reporting in your new structure starting with the Q1 results as you clearly mentioned. But I wondered if, at least retrospectively for the full year '21 figures, if you could give us a feel for how much these combined non-photonics activities contributed in revenues in '21 that would be very helpful. That would be my first question. I have one more.

Yes. We will certainly give you that bridge when we report our numbers. We will certainly point that out in detail.

Okay. But first then. All right, okay. And then just following up on the previous caller's questions on Light & Safety. Just -- I agree as well. It looked like the performance is starting to pick up. You've talked us through that. I just wanted to struck [indiscernible] as well to be a pretty significant growth contributor in the coming years. And I know some of that is expected to be M&A, which obviously you've talked about a little bit earlier. But just structurally, how are you seeing the pipeline develop globally, yes, in terms of this is typically an alternative revenue source from municipalities and so forth? And if you could maybe talk us through that.

No, I think you hit the nail on the head already. So we see this as an important part of the portfolio in order to balance out potential risks on the attractive electronics and semicon sites and so on. And so therefore, a strategically important part of the portfolio. We see that government, municipal administrations do invest into safety on the road. And I think that with particularly the energy crisis that a lot of people are forecasting for Europe, that smart mobilities, smarter ways of managing mobility in our cities, if anything, and will -- the demand for that will rise the next few quarters, in the next years. You're mentioning the M&A activities or the M&A front here. And we -- on that front, we see potential for basically a lot of different things. We see potential for additional technology, and we could bolt on to the business. Software, we did say that we want to push the recurring revenue of Smart Mobility to 50% or more by 2025, an additional software, additional technology there. But there's also a lot of room for market consolidation, which is going on. We see room for a regional expansion in other regions where we're not directly present. So basically 3 vectors for potential bolt-ons and larger acquisitions: Technology, regional expansion, and last but not least, larger market consolidations.

And we don't have any further questions.

Okay. Well, thank you very much for your participation. Thanks for being with us today. And looking forward to next -- our next touch point when we communicate, hopefully, as far as we can see strong Q1 results in a few weeks. Thank you very much.

Thank you.