OHB SE (OHB) Earnings Call Transcript & Summary

Welcome to the telephone conference of the OHB SE. On your customer's request, this conference will be recorded. May I now hand you over to Marco Fuchs.

Yes. Thank you very much. Good morning here from Bremen. Welcome to our annual report 2019 call. Of course, it's very unusual that we are doing this now via phone conference because usually, this is an event that we traditionally did in Frankfurt in-person mode. So of course, this is due to the overall situation with the corona crisis and the travel restrictions. So I hope that you all had an opportunity to download the documents, and you had an opportunity to also look at our presentation that had been published this morning. And sorry about that, changing the microphone here. As always, I would like to quickly walk you through the presentation, and then we have a Q&A session where we can discuss OHB's annual report and, obviously, other questions looking into the future. Starting on Page 2. Just as a reminder, of course, our strategy is still aiming at the full value chain, the development integration and testing of satellites; access to Space Systems, an important topic; and in-orbit, terrestrial service is a significant third line of activity we are currently building up. The expectation of data, the usefulness of space is driving the growth of our industry. This is the reason why we have recently announced that we will create a third business line, the OHB Digital. But looking to Slide 3, this year's -- or last year, 2019's annual report, the numbers that I'm walking you through is still based on the old corporate organization with the 2 divisions: Space Systems and Aerospace + Industrial Products, because that's the basis of the numbers and consolidation. But in the course of this year, we will create the OHB Digital division. Page 4, shareholder structure, management unchanged. Nothing has changed in the course of last year with regard to that. So I can quickly move on. On Page 5, this is now the slide with the results. As you have seen in our press release and in our annual report that were released early in the morning, total revenues in 2019 came out to EUR 1.03 billion. This is a 3% increase compared to last year. And EBITDA rose to, let me check on the press release, EUR 78.3 million, and EBIT was at EUR 49.1 million. So this -- the hike in the EBITDA is still related to the introduction in 2019 of the so-called IFRS 16 rules. That explains that a little bit. So overall, we are on target, a slight deviation in terms of -- that we have guided for the revenues at EUR 1.05 billion. Now we're coming out at EUR 1.03 billion. And Kurt will explain later on, in the Q&A session, a few of the details that created this slight difference, and same is with EBITDA and EBIT. But we see OHB overall on targets. The guided numbers were about 1-point-something percent, 1.8% higher. So overall, we are happy with the annual report as it came through. What was surprisingly positive is, overall, that we ended the year with a positive operating cash flow of EUR 23 million. We even achieved an overall free cash flow of EUR 4 million. We were not certain -- we were asked -- we were always aiming to a positive operating cash flow. The fact that we also ended up with a positive free cash flow overall is positive, and we are quite happy that, that ended up in the last weeks of 2019 in this way. But we'll discuss that later. If we break it down between Space Systems and Aerospace + Industrial Products, the old business divisions, obviously, no surprise. Space Systems did well, with EBITDA at EUR 65 million [indiscernible] at EUR 42 million. So I think I'm now back in the conference call. I'm not -- where exactly where the line broke, but maybe I -- we start with Slide 5, the development of the financial ratios for the group. And so sorry for this interruption, but something was wrong apparently here with the phone. The total revenues came out at EUR 1.03 billion compared to EUR 1.0 billion from last year. So it's a 3% increase, slightly below the guidance that we had for EUR 1.05 billion, and we will talk about that later. I don't know if this was already when I talked about it a few minutes ago, was already disconnected. The EBITDA came out at EUR 78 million and the EBIT at EUR 49 million, so also slightly 1-point-something percent below. Overall, we see the company on target. The performance of the company last year was as expected. What is a significant point that was positive is we had a positive operating cash flow in 2019 of EUR 23 million. And we had an overall free cash flow of plus EUR 4 million, which we were not certain to achieve for a long period over the years. So we were a bit skeptical on the overall cash flow last year, but it turned out that even the free cash flow was positive and not just the operating cash flow. But we will come to that when we ask later on. If we look at the division between Space Systems and Aerospace + Industrial Products, obviously, it's not surprising that Space Systems, with EUR 65 million EBIT (sic) [ EBITDA ] and EUR 42 million EBITDA (sic) [ EBIT ], carried the big part of the results of last year. Aerospace + Industrial Products were weak with EUR 7 million EBIT and EUR 14 million EBITDA. This is due to the transition at MT Aerospace IG from the Ariane 5 to the Ariane 6 product, which we were talking about many times. And obviously, this will also be visible in this year, in 2020, at an even stronger -- having an even stronger effect. On Page 8, I -- we confirm the guidance for 2020 with total revenues anticipated to be at EUR 1.1 billion and the EBITDA at EUR 80 million, and our EBIT should come out at the EUR 44 million that we guided. And all these numbers we guided 5 weeks ago at the Capital Market Day in February. Obviously, the last 5 weeks have developed in a way with the uncertainties around the corona situation that overall, of course, it becomes unpredictable how the year will unfold, depending also on how long the special situation that we are all in now to carry on. Of course, being in the space industry with large projects, we are not at risk with regard to the overall contract values, with regards the top line of our business. But the execution, of course, might be under a certain, let's say, delay risk because we are seeing around us, obviously, that the first signs in our supply chain, especially actually in the factory in Augsburg or in other places, where this obviously would suffer if this shutdown scenario goes on well beyond Eastern. And we don't know if that will be the case. But if it's just a brief incident then, of course, there will be no major impact. But if this goes on into the summer, and we will see that there might be, obviously, especially in the production part of our business, also some. I think the major difference from the space industry to many other industries is that we are not at risk with regard to the revenues. There might be delays, but it's not a cancellation or the demand is not changing. But of course, I'm sure there will be some related questions coming in the Q&A session. If we look quickly through the numbers in the balance sheet. On the asset side, well, not much surprise. I think the major change of the balance sheet, December 31, '19, to the previous year is the IFRS 16 changes with leasing contracts being now on balance sheet. That has resulted in the balance sheet to become bigger. That adds about EUR 50 million to EUR 60 million on both sides. We had a strong cash position at the year-end with EUR 85 million. Overall, current assets have increased significantly, mainly because of trade receivables, as you can see here. And so overall, this has been a continuation of the balance sheet as it was evolving also in the past. On the shareholders' equity side, one major effect is that you see the equity is only slightly increased even though we had a profitable year, because we suffered from the provisions for pension. This is -- the provision for pensions have increased significantly, mainly -- not mainly, only because the interest rate is, again, lower than it was in the previous years. And you know that the system, obviously, the discount of the pension provision is a significant number for our outlook operations. The other point on the liability side are basically just a continuation of the previous quarterly balance sheet or actually last year's balance sheet. Looking at the segments on Page 11, with just details what I said earlier that the Aerospace + Industrial Products division had a decrease in revenues and then -- and its profitability. We are more and more basing our success on the Space Systems. This will obviously be the situation until the Ariane transition will be successfully concluded. On Page 12, you see a number of financial ratios. So for the fiscal year 2019, you see are the free cash flow, as I mentioned earlier, to be at plus EUR 4 million, which during the year and the quarter, was quite significantly negative. So what this line really shows is how our cash profile over the year was where we start with a good position. And then during the year, over the quarters, it is then requiring some financing. And then at year-end, it's recovered. This was the same in 2019. That's I guess where you see the other numbers. We had a very -- or we had a lower -- much lower own capital, own work capitalized, which was EUR 17 million in 2018, and it's now EUR 10 million in 2019, so a significant decrease there. CapEx was also slightly lower with EUR 21 million instead of EUR 24 million. So something that might be of interest to some of you. On Page 13, you see the net debt evolution. The blue columns are the annual ones and the gray ones are the quarterly ones in between and the evolution during the year 2019. So we end the year with EUR 27 million of net debt, excluding the pensions, instead of what you see in the previous year at EUR 7 million and previously, EUR 36 million and EUR 37 million. So this has been a pretty normal year. Moving on to Slide 14. You see what I said briefly earlier that own capital -- own work capitalized is, over the last years, continuously decreasing from the peak in 2016 were EUR 29 million. It moved down to EUR 19 million and EUR 17 million in the years '17 and 2018. Now at EUR 10 million, but this is an intended development. Overall, other CapEx, slightly lower with EUR 21 million compared to the EUR 25 million and EUR 24 million in the years '17 and '18. Page 15, again, the free cash flow. Return on capital employed was weaker in 2019 than it was in 2018. But this obviously has to do with the enlarged balance sheet. So there are simply more capital employed so that the return has weakened. Moving on the next few slides. 16 shows the headcount, 2,933 total headcount. I think what is significant is that you see the dominance of the Space Systems division. It's even stronger with 1,980. So the Aerospace + Industrial Products part is significantly smaller. And if you look at the geographic footprint, you see that with 2,400 people, it's a very strong domination of German operations to about 427 or, let's say, 530, if you add it all up outside of Germany. So very much a German-based Space Systems company that is -- but the growth in the past years has been very strong with OHB System. Now I'm turning to the future. The order intake, starting at '17, you see the history of the backlog currently at EUR 1.8 billion. And the next few slides, I just recap on Page 18 and 19, the ESA budgets. The decisions based on the Space19+ conference. A couple of months ago, NCV, have increased the total budget, the total funding that is spent by ESA to own budget, EUR 4.8 billion this year, and including the income from the European Union, it's EUR 6.68 billion. That is spent, as you can see on Page 19, on a number of domains where we are very strongly represented, especially earth observation, of course, is a high interest, but of course, also space transportation, navigation, where we are, also our share of the business. So overall, coming to the expected order intake, you see on Page 20, number of activities where we expect that this year should have the opportunity of order intake. If you look at that list, Galileo and Copernicus, those are obviously very competitive situations where we need to win contracts against others, and it will be very exciting times. I have to see if we are able to be successful on Copernicus and Galileo. There are a number of other activities like Hera, Flyeye but also the Ariane share that is and also Electra that is not competitive in the sense that we have already worked on these activities since a long time or we have won competitions like on Hera in the past. So this is a continuation of existing work. So that's -- those are smaller numbers, but not under competitive, let's say, uncertainty. The institutional commercial customers that we lump together in the last line are a number of activities that we are working currently on. So overall, we expect that the conclusion of the summary of this slide, we expect an order intake this year in the range of EUR 2 billion. So that should give a good basis for future development. On Page 21, you see a number of our Copernicus proposals that we have delivered in the past weeks and months. We are prime contractor together with Thales Alenia on LSTM, on CO2M and on CRISTAL, and we have a significant role in time for the payload. We're still working on 1 more proposal. Those are now under evaluation, those 4 already. And we hope that we will generate a significant share out of that. Just a few more points before we move to the Q&A session, on Page 22 as recent development. Since a couple of weeks, since actually February 18, we have a satellite in French Guiana to be launched on the next Vega launch. It's the ESAIL satellite that we built in our Luxembourg LuxSpace operation. Unfortunately, now due to the corona crisis, the launch that was scheduled for next week has been postponed. So the launch date currently is uncertain. But obviously, this does not economically impact us, but it just shows that also the whole space industry is impacted by interruptions or delays coming from the corona situation. Page 23, an update from other activity. Our MT Mechatronics project in Thailand had a big lift. The big lift is the moment when the reflector is put on the steel substructure that has taken place recently and just shows that this business is also operating with a global customer base moving along. And we are just in the course of restructuring the ground infrastructure activities around these projects. The last slide is 24, an update from our Belgium operation. Antwerp Space has strengthened its position in the navigation market. We acquired from Septentrio a small GNSS division. That has been now completed. We also moved some work following the Brexit, the activities from the payload testing. The secure testing of the Galileo navigation payload has been moved from our friends and partners at SSTL in the U.K. to Antwerp. So that strengthens our Galileo activities there quite significantly. Also, late last year, we have sold a small activity around low margin, around products from Antwerp Space to Celestia. That has been already reported, but this shapes a little bit, and I really believe it improves the business portfolio of Antwerp Space. Yes. Looking now to our financial calendar ahead. Of course, we're in uncertain times. And when it says that on March 18, we have our analyst conference in Frankfurt on mind, it's not quite true. We're sitting here in Bremen at a phone conference. And obviously, we are not completely sure if our Annual General Meeting will take place on May 26 here in Bremen as a public event. We'll see. That will be decided course of the next weeks. We're still aiming for that. What is certain is that on May 12, we will have the 3 months quarterly results with our conference call. And of course, the same will be in the later course of the year in August and November. So I'm concluding my quick run through the slides, again, with the thank you that you are spending your time on following OHB today. I would like to open now the session for questions to you. Thank you very much.

[Operator Instructions] The first question comes from Alexander Hauenstein from DZ Bank.

Sorry, but I missed the 15 minutes first of your call at the beginning. But could you give us a quick feeling where you are currently impacted in terms of your planned activity from the corona issue? And especially, where do you see the biggest risk regarding your 2020 EUR 44 million EBIT outlook? That would be my first question, please.

Yes. I think the answer is quite easy. The biggest risk is not that we lose contracts or that the demand is changing. It's just that potentially, there might be delays occurring around the project completion. So there might be, let's say, if the operations are more severely impacted than they are currently where we are operating and have a significant home offers and have a very flexible response to all these boundary conditions. If this goes on for a very long period, obviously, there is a risk that delivery milestones are not met. And this obviously then could result in an impact on the numbers. Currently, we don't foresee this. But on the other hand, we don't know how long this severe restrictions are going on. At one point in time, especially for our factory operations in Augsburg, that's not the case yet. But at a certain point in time, also the supply chain with material might be impacted, and that would also then have impacts on that side. So summary is, I think our business model, the way we work and also the activities where we are involved, are not really impacted very strongly by this crisis. But of course, if it takes very long, of course, we cannot assure that there's nothing to be seen currently. As I said, there are a few launch delays. I talked about ESAIL. Last week, there was an announcement that the ExoMars mission will launch later. But this is all after our work. So -- but this might change over the next couple of weeks.

[indiscernible] project completion and the potential delays. In case it happens, [indiscernible] is it just an event to be able to pay some kind of penalty fee here? Or is that kind of ruled out in such a special situation there? Or would that be something unique throughout the discussion it happens [indiscernible]?

Yes. I didn't fully understand exactly how much you asked, but I understood that you were asking about the contractual consequences, potential penalties and what that means. But obviously, it's a big question. But the crisis, as it unfolds, is for us, clearly coming from the direction of force majeure-type story. So when the launch operations are discontinued, or if, for example, test facilities at ESA potentially are impacted, this is something that we believe will be exclusive with regard to penalties and other contractual consequences. Of course, on the other hand, if things take longer, far enough but not to pay penalties, because if you spend more time and more efforts, you have still an impact on the economic results. So the overall risk, it's something that we are currently like everybody else is working on. This is why we are continuing to push the completion and the work on our projects. But I cannot deny that there are risks. If the impact on the operation is more severe than what we see these days, if that intensifies over the next days and weeks, there might be significant delays also in the completion of projects coming. Again, I don't see this in the corner of penalties in these type of contracts, but it is clearly an uncertainty that also impacts our industry that is not impacted in a massive way, but it's obviously part of the overall economy.

I'd like to add that -- Lutz Bertling speaking. But first, I'd like to add that discussions have been started with customers already, not only in our initiative, but as well customers, in particular, ESA, has taken initiative to get together with these large NSIs and with Eurospace, the association of the European Space Industry. And as far as we can see it from the very first discussion, this goes beyond acceptance of force majeure, goes more in the direction of the customer being ready to accept that the coming crisis creates some additional cost on supplier side. And from the very initial discussions, I can say that there seems to be openness on customer side for some compensation of potential overcosts.

Okay. [indiscernible] we get the delays, of course, the one, but no additional burdens potentially. That's the thing.

Yes. That's our understanding. So delays and no additional burden, right.

Yes.

Okay. And maybe another question. Could you give us or could you speak a bit about the goodwill composition in balance sheet, please or [indiscernible] balance sheet. [indiscernible] but maybe you can give a feeling here where we might calculate some kind of hard book value per share calculation or something like that in order to give people a bit more better feeling where we are in a potential bottom-like scenario.

Yes. I think on the goodwill, it is at a very low level with EUR 7 million. There will be certainly no impairment things. I understand -- I mean, your question, if I understand it right is what is, let's say, the worst-case scenario in the sense of what's the book value? What's the downside? What is the value of the -- let's say, the asset value and so on? Again, I think the goodwill is not impacted. We do have, however, capitalized all work in the magnitude of about EUR 110 million or EUR 115 million, whatever the amount was. So that is something that goes through an annual impairment review. So that would be something that people would look at. But again, looking at a business that is EUR 1.1 billion, the overall amount, if you put it all together, if you look at goodwill, the capitalized own work together, we're at the range of 10% of annual revenues. So that is a comfortable low number. So basically, the overall volume is about EUR 120 million out of EUR 1.1 billion. We feel this is a quite comfortable proportion.

Yes, it is. And the last question here, maybe, how are you progressing most recently with your efforts on the ramp-down Ariane 5 and ramp-up Ariane 6 and the related let's say, optimization and restructuring measures? Is this progressing? Or is that also quite impacted from the recent base? Or how do you feel about that? Or maybe an upgrade, let's say, what has been going on within the last 4 weeks?

Yes. I guess it's -- I mean, it is moving along. Of course, the ramp-down of Ariane 5 simply took place, more or less, and it's in the last order. So that has been accomplished. What is going on in the last weeks is the implementation of the decisions at the ESA conference in November. So we are implementing those measures that are contracts to improve the Ariane 6. That is so-called Airbus, what was called back-up stage is moving along. So some of these contracts are in the finalization phase. We are reducing workforce, yes. We are negotiating and reducing workforce. I think when we're looking to quote, I think this has already been done, right, the contracts. It's not -- I think it's in the last step. So we are adopting the factory. We're adapting the plant lower overall workload. And it's basically identical to what we discussed in February. So this plan is being implemented. I think this overall corona situation is not impacting that one way or another.

The ramp-down activities in MT are already established in the balance sheet for 2019 [ and for ] business are made, especially in [indiscernible] in this area. The discussion in provisions already done in 2019, and that's one reason for the full result of the segment in 2019 and another reason for the more forecast in this -- for 2020 in the segment, reflected -- and at the end of the day, it's expected that EUR 44 million guidance for 2020. Not included, obviously, is any implications from the corona disaster. But at the end of the day, if this is -- as Marco Fuchs already mentioned, there will be some implications for sure, but we are not in the position now to detail above that's what I have because [indiscernible]. And it also depends on what will happen in the next weeks.

The next question is from Adrian Pehl from Commerzbank.

I hope you can hear me well. I know that lines are obviously are pretty bad due to heavy traffic, I think, but I keep trying for some questions. So first of all, as you were referring to the supply chain in Augsburg, I was just wondering whether you see any issues upcoming also for the satellite production. Or is the inventory that you currently have sufficient for a decent production to be kept up over the next couple of months? And a question related to corona. Could you remind us actually on the financial crisis, whether you did see some project push-outs from a budget perspective? Or has that not taken place at that time, that will be helpful. And then I have probably some housekeeping follow-up questions.

Yes. The last point you were mentioning, well, it was actually more the opposite because during the crisis, the government spending -- so we -- the overall investment in technology in useful infrastructure was even increased as part of the let's say, the measures to keep the economy going. So in that respect, I do not foresee that overall spending will go down. It's probably more a selective issue where the money will be spent. And obviously, space has to explain why it's a useful activity and what the benefits to society. So overall, no, I do not expect that this will be cut down. In terms of the supply chain for satellites, currently, we don't foresee any significant points, but what is more critical is, for example, going to test houses and doing the external testing, this might be impacted. Maybe some logistics are impacted. Launches might be delayed. So there is an overall delay risk coming, but it's not that we are -- because the optimization of the supply chain in our industry is far less time-critical than you have it on other industries. Other industries are doing this with daily stuff because they have a lot of work in progress and a lot of material that they want to optimize and not sit on their own books in their own factory. That's not the case with us. Our staff sits here for months before we install it sometimes. So we are -- we have a very different risk assessment on the optimization of balance sheet and risks and current assets. So in that respect now, we are lucky because it doesn't backfire on us. So that's not really the issue. But on the other hand, it's just one little thing is missing. Satellites will also stand still. But again, we are not working on stuff in a daily production, but in a year, multiyear project mode. So it's not that critical than you see with many, many other industries.

I agree. Actually, on the financial result in Q4, that has been pretty high. At the same time, minorities, obviously, due to the lower income from MT Aerospace have been low. But I was wondering, first of all, what's the background? And is there some link between those 2 items? And on Aerospace + Industrial Products in general, the EBIT has been slightly negative in Q4 already. I was just wondering whether it was already below your original expectation? Or is that more or less as you thought it would turn out to be?

Financial result is poor, mainly due to the fact that we have since an equity result of minus 7 -- minus EUR 3.7 million. This comes from our minority participation in Aerotech Peissenberg in Peissenberg, and they really had a poor result, and obviously, a poor result, in 2019. That's the main reason for the comparable worse financial result in Q4. Or there is a big impact at the end of the day at some point. But what happened in the segments, Aerospace + Industrial Products in Q4 or in total year 2019, '19 was more or less in line with our expectations for this year. We see clearly in the segment reporting that we have a really good result in the main segment-based system with good increase of the EBIT amount. And you see also substantially the substantial decrease of the EBIT result in Aerospace + Industrial Products. This was more or less expected. Results from MT Aerospace itself, standalone and Antwerp, was not worse than expected.

Now what is really important to understand that our Aerotech Peissenberg participation, which is around 30%, was significantly impacted by the restructuring program that is going on there. So there has been reserves created at ATP for the restructuring had reduction. And that came as a little surprise for us because it -- again, it's not part of the consolidation perimeter, and it was more intense. So the result was more negative than what we expected in the fall of '19. So that's the price of this result.

Yes. They have put provisions of that in Q4.

Yes. That resulted in the financial results that you see and overall. And that has overall also an impact, there was some downgrading on some open loans between MT and RTP that impacted significantly. So that was one of the major effects that came in during the -- actually, the last couple of weeks as a negative impact. Actually, even after the Capital Market Day partially, we didn't even know that fully at the Capital Market Day, how intense the restructuring is. But the bottom line at RTP's restructuring is that, of course, like with every restructuring, you put the burden into the past and then you hope to improve in the ongoing year.

Yes. Okay, and I have 2 questions then. Well, first of all, what's to come at Aerotech Peissenberg? And what do you think strategically about it going forward? And secondly, on the group cash flow, both operating and free cash, let's leave out corona because, obviously, we don't know how that unfolds over the year. But on a current basis, what you can see -- what should we think of operating and free cash flow for this year?

Yes. That's a good question. I'm not so sure if we can leave out corona from this forever. But I guess, the overall cash flow situation is what you see basically on Slide 13, that over the year, 3 months, 6 months, 9 months. Obviously, the debt was much, much higher. And always, at year's end, as you can see at the year-end of '19, '18, '17, significantly lower. So obviously, the cycle, the curve will be similar, where it will end in 9 months and 10 months, it's not completely predictable. Actually, honestly, I was personally quite positively surprised that we had a positive operating cash flow of more than EUR 20 million and that the free cash flow also was positive. And if you remember carefully, we never announced that there will be a positive free cash flow. We already said there will be a free operating -- positive operating cash flow, but that was also a positive free cash flow was something that we were not completely sure in the course of last fall. And it turned out to play out well. So what I'm trying to say is that you always have this uncertainty. The overall year 2020 will be difficult in terms of cash. I don't -- now, if you ask me now, I cannot put aside corona. And including corona, I think it will be difficult. I don't know. Kurt, what is yours?

Yes. I agree. At the end of the day, in 2019, the cash result was maybe better than expected. And the cash flow, we never have expected that. And for 2020, the forecast, well, corona was also a critical concerning to achieve positive operational cash flow. But now within impacts of corona, it's really not since the predictable one.

It's not even necessarily negative because this corona, I think, will start a number of changes on -- because we are working substantially for institutional government-related customers. So there might even be that there are compensation measures. So I'm not even sure that this is all negative, negative, negative. But it's uncertain. This is what it really comes out. So there are packages prepared that advanced payments, partial payments and so on and so on and so on. So the overall, let's say, institutional systems will react to the crisis in a more forthcoming comforting way. So this might be better than you think. But currently, as we speak today, in March 18, obviously, we are really not sure.

Yes. It's completely right. It doesn't mean that is worse than expected, but it is unclear. It's very simple, unclear.

And Aerotech Peissenberg, what is an additional remaining risk? And -- yes.

Probably -- I mean Aerotech Peissenberg, that went through a restructuring in last year, and this is -- I mean, if you remember, and you have been following OHB since a couple of years, this was the same 5, 6 years ago when we moved into a minority position. The bottom line of Aerotech Peissenberg is obviously, is attached to the aero engine business cycles. And that is -- that's also an industry that is in a difficult situation currently because the whole airlines are suffering. The aero engines are still doing okay. But obviously, it's impacted by the overall uncertainties coming from the 737 MAX situation. So my bottom line is, we have moved into a minority position because we regarded it 6 years ago as nonstrategic, and that has not changed yet. That's still the judgment. It's a nonstrategic minority participation. I'm not so sure what to do with it long term. I think now the restructuring should result in a better outcome for 2020, 2021. But it's not core business for the OHB group. But this might change if the industry changes. I -- unfortunately, I'm really unable to foresee the aero engine or the aeronautical business. I think, putting it all together, also the changing in the travel habits that we would maybe see as something forthcoming out of -- or the traveling is changing dramatically. Our company doesn't travel at all. So I'm sure that many, many companies don't travel at all. I mean all the airlines are basically shutting down. So what does that mean for a supplier into aero engines? My concern is, if less aircrafts fly less hours, there will be less aero engine parts, maybe. I don't know. But this is just momentary glimpse. I don't know. Lutz, if you have an idea on where you see the aero engine industry going?

Frankly, as you are, I would say, for sure, at a certain time actually will return. But for the time being, the combination of trading being down, less new engines will be taken. We still have [ 7 units, 7 case ]. The delivery rates of [ Amazon ] pooling for other aircraft types will go down. It's certainly a good time for maintenance because old engines will be used longer. But if aircraft don't fly, then your maintenance effort is very much reduced as well. So super difficult to predict at the moment.

So in other words, that is not strategic. We are happy that RTP is not our core business.

Yes. I mean he will be the executive board of Rolls Royce as told. We would have more headaches than we have at the moment.

Yes, yes, fully you'd be. So that has been -- sorry, just a last question on that topic. Do I understand that you, more or less, have written off the asset completely then? Or is there some remaining book value to be written off as sort of potential risk going forward?

I think currently, the book value is -- I mean, the equity balance sheet recognition is 0.

Yes. That is 0. Okay.

An upside.

Yes. It could be an upside, potential upside, you're right. Yes.

Right. I think that's the case. Yes. That's right.

And thanks for saying just a couple of years, makes me feel younger a little bit. Actually, I think I've been following the company for 16 years, with probably 6 to 7 years interruption, but anyway. So I wish you all the best in corona. And thanks for answering the question.

Thank you. Thank you.

The next question is from Jasko Terzic from Bankhaus Lampe.

My first question is again on Aerotech Peissenberg. So do you think those restructuring mirrors are enough? Or is there the risk that we, in the running fiscal year 2020, do also face a potential significant negative contribution?

No. First of all, I think it is enough because it is a plan that was -- that plan, I'm certain, has been already agreed with the Gesellschaft mit and the BRIEF side and so on. So there is a so-called again some tariff -- an additional tariff agreement implemented. And it will not have any impact on the OHB balance sheet because it's at equity, and the equity is already written off. So that's a net equity participation at zero valuation. So there will be no impact coming from that.

Okay. Then regarding your...

There will be no negative impact coming. Obviously, if there's a positive development, there's an upside.

Okay. Understood. And then on your Italian production in Milan. Any update here, how it is progressing until recently?

Yes. Of course, Milan is, of course, our most difficult location. It's in a location of about 200 people really in the city of Milan. So in the heart of the crisis area in Lombardia. And they have a very reduced operations. So there are people at the company, a massive home office operation going on. Many, many people have been sent home with work. Some people are at home not working. So management is there every day. I'm having a daily call with Roberto Aceti. But I can only say it's a very intensive process. They are much more than on our German side. So the number of people in the company is percentage-wise lower. But it's still operating, so there's no restriction that you operate a company. I'm hearing from Roberto is they -- even in Lombardia, they even stopped testing corona, people that are not having obvious sickness and signs. So it's not even -- when I asked him, do we have corona cases in the company that I don't know? So it's a different level of site within Lombardia than we have in other operations. So this will be something to follow. On the good side, obviously, this will also be the side where you see changes moving first. So if Lombardia moves out of the crisis, then we can anticipate Germany will also move out of the crisis according to those things. So -- but it's difficult in Milan.

Okay. And maybe could you help us out? I guess you've run a scenario calculation. Could you give us an indication to what level of sales decline just hypothetically you would still be breakeven? Is there a figure you can share with us?

I don't have that figure, no. I think this is a figure -- I mean, we have never calculated that figure. I do not expect that much as a sales decrease. I think that -- again, all our contracts, our top line is robust. We have no cancellations. We have no, let's say, just a pure demand.

It can only be that turnover is moving from 2020 to 2021 due to schedule delays in programs, that's possible. But it's not possible to make a forecast up to now how much can it be or something like this. We have to expect up to now will be no reason to not confirm our guidance.

Okay. Maybe...

I'll remind you what we discussed earlier, we have basically no goodwill in the balance sheet. So there will be no extra write-offs from that side. So again, there might obviously impacts. But overall, our balance sheet, our business model and our customer structure makes us more robust in this crisis than most others.

But there could be the risk that there will be a significant reduction in activity in Bremen, for instance, which then, of course, will have some impact on the EBIT, right?

Yes. I mean at one point, it might be the case...

I'm not so sure. Yes, it can be, but I'm not so sure about that. I'm really not so sure about that. I'm actually -- it's -- nobody knows what in the next weeks will happen. There will be, for sure, some delays in our supply chain. There will be, for sure, the case that people achieve in a later point of time, some major milestones, maybe. But it's not correct to say today, it will be -- this will have significant impact on our EBIT. For sure, we cannot say that. Very simple.

And this is something that we call customers seem to show flexibility to recognize milestones even under other conditions than they were originally foreseen in the contracts. I mean our customers are governmental customers. And the European government, at the moment, do everything. As you can see, they do everything to support industry. And of course, it's not only by the government themselves, but by government agencies and entities. And their behavior, they obviously have got clear instructions as well to behave in a flexible way and the support of greater industry. So from the very first talks, which have happened in the last 2 weeks, I would say, we see clearly an openness and even an initiative on customer side to come up with schemes, which will support industry and suffering not significantly from the current crisis.

If you compare it, it's a comparable. If you would like to compare to 2008 financial crisis, in 2008, there was really no impact on OHB System of this financial client, no impact in terms of turnover and unprofitability. Maybe another case, and I would not say that for -- in any case, we will achieve this guidance. But up to now, it's not fair to say to make an assumptions that the EBIT figures will be reduced for a certain number. We cannot do this, so we will not do this.

Okay. Understood. So maybe one final one on a scenario type of question. When you assume that you have an interruption in Bremen of 4 to 8 weeks, what will it represent in your sales as a delay for the running fiscal year into the next year, just as a rough figure?

No, you can get -- again, we will not communicate any figure about this today. We cannot do it. It's not a -- we're said to do it at the end of the day. We cannot expect that we have in our forecast and delay of 4 to 8 weeks or top of business for 4 to 8 weeks, so sure not. And we can talk about that if it is the case. But actually now, we will not talk about that, and we are not prepared to talk about that and over.

Now our business model, as you know, is project. So we are selling -- I mean, we have people working hours booked. So obviously, if -- let's say, I mean, very simple. If 1 month is 1/12 of the year, you have to take out the materials and stop. So you basically can make your own calculations around that, but we are not going into a situation where there's nothing -- nobody working. We are distributed over Germany. We're distributed over Europe. And there will be certainly operations at a certain level going on. So for example, when we now look at where we are operating now, we have the majority of the people are working in the factory. And the big part of the people will always work at home office. So there are many activities here for engineers that do software writing, that do report reviews, that do work on computer, that will continue to work no matter what. We are not -- I mean, the percentage of people that really stand in the integration facilities working on satellite is minor. Bear in mind that the productive process of OHB, mainly in the satellite domain and OHB System, is engineers sitting in front of a computer and working on things, as I said, either doing design, reviewing engineering work or working on documents. So this will go on. This will definitely go on. We have quite positive experience with home office. And it's partially even the case that people in home office are even more productive than at the company because there's less interruption. And even if the -- I mean, so what is very important for us is to keep the IT network running. That's the core interest we have all. And even with limitations on the IT network, work can be done in a decentralized way. So again, we are an engineering company that will not simply stop like a production facility. Of course, house work is a bit different. But the fact that the engineering teams will go on and will slow that down. But again, I think it all depends how these prices will evolve. If there is a more severe crisis that goes on for, I don't know, 8 months, of course, there's a different impact than when it goes on for 4 weeks, yes.

The next question is from Zafer Rüzgar from Pareto Securities.

Three questions left from my side. First, yes, I understand that it's not easy to quantify the possible impact of coronavirus. But when do you expect to see the initial impact on your P&L? And would you or can you confirm that Q1 so far is a rather normal quarter, Q1 2020? And then 2 questions related to the financials, so maybe to Kurt Melching. First, maybe I missed it, but can you summarize the reasons for the slight miss of your guidance 2019? And then finally, related to your guidance 2020, maybe you can provide some breakdown on segment level on the expectations for 2020.

Yes. Maybe I'll start. Overall, obviously, first quarter almost being completed. We do not expect any major surprises on Q1. But obviously, moving on, this depends on how April unfolds. But Kurt, do you want to take a question on the detailed breakdown?

Yes. For the guidance, EUR 44 million EBIT. We have a situation that a share of Aerospace + Industrial Products, and this is around EUR 5 million, EUR 6 million roughly and less coming from Space Systems.

Okay. Okay. And then the miss of the 2019 guidance?

Yes. So product, a miss. I mean we see this still a 1-point-something percent. So this has taken place mainly when, let's say, in the auditing, some conservative look has been done on the intercompany with ATP, where there has been a write-off or a conservative judgment on the intercompany loan. There had been a couple of smaller items here and there, a couple of hundred thousand here and there. So overall, we are at EUR 49.1 million. Of course, yes, we expect it to be at EUR 50 million. So I guess this has been evolving over the last year. You have to understand that also the overall view on auditing, of course, in the last days and weeks with regard to provision taking and sufficiency of provisions is more conservative, anticipating already the atmosphere that, of the year, that is unfolding. So there has been a slight lower total revenues with EUR 1.03 billion instead of the guide at EUR 1.05 billion. And that has to do basically with revenue recognition in last year of subcontractors that didn't take place in the way as it was looking even at the beginning of this year. So -- but the bottom line of our view on that is that we see this to be on target since it's more or less than 2% deviation. That, I think for the current boundary condition, is on plan.

There are no further questions.

Good. So then I would like to thank you all for your time, for your attention, of course, during these times where I appreciate very much that you're spending your time with OHB. And we'll certainly hear again on May 12, after Q1 results, will be the same format. You're obviously all invited to that. But if you have any questions, of course, you're free to call Martina or Kurt or anyone or any of our teams here. So I wish you a good week, and I hope that we stay in close contact also in the coming weeks. Thank you very much. Best regards. Thanks from Bremen. Bye-bye.

We want to thank to Mr. Fuchs and all the participants of this conference. Goodbye.