Zumtobel Group AG (ZAG) Earnings Call Transcript & Summary

Yes. Good morning, ladies and gentlemen, and welcome to Zumtobel's conference call on the full year results of 2020/'21. With me on the call today are Alfred Felder, our CEO; Thomas Tschol, our CFO; as well as Thomas Erath, who will join the Executive Board as new CFO starting with 1st of August. Alfred will walk you through the highlights of the year, while Thomas will give you Zumtobel's financial performance. At the end, Alfred will present the outlook. After the presentation, both gentlemen will be available to answer your questions. And with this, I hand over to Alfred.

Yes. Welcome. Good morning, ladies and gentlemen. Thank you for joining us today for our annual results. Obviously, the financial year 2021 was, despite the challenging environment, what we had, especially at beginning, a successful year for our group, where we have demonstrated a robust position and capability to react quickly and consequently on this exceptional situation. You will see it later when Thomas presents the financials, but I would like to give you, what you see here on the first page, a few inputs on the highlights from 2021. Looking at the projects what we did last year, among many, I just want to highlight 4 of them which should give you an impression on our portfolio and our solutions. We implemented another highly sophisticated customized lighting solution for the Esplanade of the Allianz Arena of Bayern Munich. Here, we did next to the inside also the whole outside, and that was just completed by the end of April. On the other hand, we did a major refurbishment project first time for -- in France with Aldi Nord. And also, we had a couple of other projects with Amazon in different countries, which has become a key account for us: U.K., Spain, Italy, Australia. And also, we are very proud that we have been able to win the illumination of the Apple Tech Campus in California. As you have seen from the publications, our aim is to become carbon neutral by 2025. And therefore, now during the 2021, we have implemented another step to achieve these goals. And since March 2021, all of our Austrian sites derive 100% of the electricity from hydropower. This transition to that hydropower will reduce the CO2 emissions of the group by 1,500 tonnes annually in reference to the relevant environmental data for the '19/'20 financial year. We are currently evaluating the measures of all our facilities abroad. And we also made further progress on delivering this strategy focusing mainly on the restructuring cost management program as well as sharpening our brand strategy and positioning our brands in the lighting, mainly Thorn and Zumtobel. However, if you look at the year, the COVID-19 pandemic and the resulting economic reality led to a decision to further develop the strategy from our FOCUS into FOCUSED, where we have added 2 major pillars what we drive, one the E for the environmental; and two, the digitization, what we preponed from the original plan starting -- started in '21 of doing a transformation of all our processes into the digital era, and it's a company-wide, group-wide program, what runs currently at full speed. With it, I would just stop here and hand over to Thomas to give you the insight on the financials for last year.

Thank very much, Alfred. Good morning, ladies and gentlemen. Also a very warm welcome from my side. Like always, I would like to start by giving you a brief overview on the financial highlights of our financial year 2020-'21. Obviously, the first 3 quarters have been negatively affected by the impact of the COVID-19 pandemic. But however, in quarter 4, we managed to beat prior year levels. In total, the group revenues came in at EUR 1.044 billion, which is around EUR 87 million below last year. Lighting Segment contributed EUR 794 million. The Components Segment generated EUR 303 million, and therefore, both below previous year levels. The revenues were particularly hit in North and Western Europe, especially in U.K., Sweden and Norway. The group's adjusted EBIT came in with EUR 45 million and around EUR 8 million below previous year level. The earnings were supported by a reduction of fixed cost and utilization of short work options. The gross profit before R&D was EUR 31 million below previous year. The selling and administrative costs were with EUR 24.2 million lower than previous year. The largest savings really is in personnel costs, especially due to the short-time work options, travel expenses, marketing and the lower transport cost which resulted from the decline in the revenues. The 2020-'21 net profit increased significantly to close to EUR 47 million compared to EUR 14.5 million in the last year. The net profit includes a one-off deferred tax effect of roughly EUR 16 million, thus deducting this one-off effects, our net profit would be around EUR 20 million, which is roughly -- or roughly double [ of the price ] value that we had last year. The group's free cash flow increased substantially to EUR 100 million, and we could strengthen our balance sheet even more. The pandemic situation, obviously, remains uncertain, but the financials show the strength and stability of the Zumtobel Group and confirms the success of our quickly implemented effective crisis management in dealing with the effects of the COVID-19 pandemic. Let's move on now to the next chart to give you more details on the development of each segment. On Page 4, we start with the Lighting Segment. As usual, you can see the revenue development by quarter on the left-hand side and the adjusted EBIT development by quarter on the right side. On a full year comparison, both revenues and adjusted EBIT are still below previous year as a result of the pandemic. Revenues declined by 6% from EUR 845 million to EUR 794 million. Adjusted EBIT declined by roughly EUR 11 million to EUR 37 million in the last financial year. However, the fourth quarter showed an easing development. As you can see, revenues increased by 15% to EUR 220 million in the fourth quarter, especially the economic recovery as well as the low levels we saw in the fourth quarter last year supported this development. Following the good top line development in quarter 4, our adjusted EBIT increased by EUR 3 million to EUR 10 million. The adjusted EBIT margin was close to 5%. Let's move on to Slide #5 to the Components Segment. The full year 2020-'21 revenues in the Components Segment stood at EUR 303 million. This is 11% below last year, while the adjusted EBIT amounted to EUR 23 million, which is almost flat compared to last year. The adjusted EBIT margin was 7.5% above previous year level. Quarter 4 revenues were with EUR 84 million flat compared to fourth quarter last year. And please remember that the quarter 4 last year benefited from stock building effects in the sector since many customers significantly increased their stock levels with the beginning of the pandemic. Therefore, quarter 4 results were good, and they were the strongest quarter in the financial year, which also reflects the economic recovery. Furthermore, we saw a low price pressure in the market of below 1% compared to 5% to 6% in the prior year. The adjusted EBITDA level, the profitability increased substantially in Q4 by close to EUR 9 million to EUR 11.7 million, which is nearly 4x higher than the last year's quarter 4 result. Main drivers were positive FX impacts, mainly coming from the low U.S. dollar, material cost savings supported by the revaluation of inventories prices. As a consequence, the adjusted EBIT margin is significantly high at 14%. On Slide #6, we can see the -- we see the results of the group. So this is to say the combined result of both segments. While on a year-on-year comparison, we are still below previous year levels, you can see the [ peak ] in quarter 4 for both revenues up by EUR 25 million to EUR 285 million and adjusted EBIT up by close to EUR 11 million to EUR 17.8 million. Therefore, the adjusted EBIT margin stood at 6.2%. This is an encouraging sign since it shows us 2 things. First, we do see light at the end of the tunnel, meaning a positive trend in the market. And second, our cost-saving measures, which we implemented, showed clearly its positive result. So I move to Page #7 to show the main building blocks of the adjusted EBIT development. Starting with the prior year, adjusted EBIT of EUR 43.9 million. The absolute gross profit of the group before R&D decreased by EUR 31 million, which is basically the result of EUR 87 million, lower revenues with the prior year period, and partly offset by savings in the cost of goods sold. R&D expenses increased by EUR 2 million in order to increase the effort of developing innovative products and solutions, which is for us an enabler for sustainable growth in the future. And in the functional area, selling and administration costs, we can see additional cost savings versus previous year amounting to EUR 24 million. Here, especially the utilization of short-term work options, supported low cost base in addition to savings like marketing travel and transportation. Other operating results, excluding special effects, came in with EUR 1.7 million. And consequently, this leads us to an adjusted EBIT of EUR 45.5 million in the last financial year. On Slide #8, you can see the full P&L statement. There is generally not too much there, but I would like to draw your attention to 3 items. The negative special effects decreased very significantly from EUR 18.8 million to just EUR 2 million, first. Second, the financial result improved by EUR 3 million to minus EUR 9 million as a result of significantly lower debt and lower interest levels as we could profit from a better margin grid due to a better ranking of our covenants. Please be aware that the net -- the income taxes of plus EUR 12 million include that the one-off -- or the positive one-off deferred tax effect of roughly EUR 16 million, which was ultimately the trigger for our latest talk message on May 31. This brings up to a net profit of EUR 45.6 million translating in earnings per share in the amount of EUR 1.06 per share. Deducting the one-off effect, our net profit would be still twice the level of last year. Consequently, earnings per share adjusted, but these one-off effects would amount to EUR 0.68. Now let's move to the very positive news on the cash flow statement. The cash flow from operating results increased from EUR 101 million to EUR 115 million, following the better profitability. We had significant, again, improvement in our working capital, mainly coming from our -- from a lower -- our lower inventory release and the working capital stood at EUR 152.5 million. The cash inflows from the change in our operating position totaled to roughly EUR 18 million, mainly due to additions to provisions and guarantees as well as lower receivables from research and COVID-19 government grants. Consequently, the cash flow from operating activities increased from EUR 108 million to EUR 140.7 million. And due to the dynamic challenges, the cash flow from investing activities was EUR 40.7 million and the capital expenditures mainly comprised investment tools for new products, expansion, maintenance investments and capitalized development costs. Based on this increase on the -- of the cash flow of operating activities and the reduction in cash flow from investing activities, we came in with a free cash flow of EUR 100 million, which is substantially up on a year-on-year comparison and the proof point for the measures that we took in the last years. Let's move on to Page #10 to the balance sheet. The net debt decreased significantly to EUR 97 million as of end of April '21. This is almost EUR 70 million below the value that we saw 1 year before. our net -- our debt coverage ratio went below 1, and our equity ratio above 31%. That was more than well in line with our financial comments. To sum it up, our strong balance sheet secures our liquidity position in the current crisis, which we are still facing, and gives us the opportunity to take action in the future. Before I hand over to Alfred, who will provide you with a brief update on regional sales developments and the outlook for the full year, I would like to take the opportunity to say thank you. As you know, I will resign according to plan as of end of July '21. And Thomas Erath, who's currently the CFO of Tridonic, will join the Management Board of the Zumtobel Group as CFO beginning of August. Therefore, this is my last conference call and would like, first, to thank you for following the Zumtobel Group and the trust that you have put in the company; and second, Rich Thomas, as new CFO, together with Alfred and Bernard Motzko, all the best for the future. Thank you.

Yes. If we switch now to Page 11. Thomas mentioned it already in the -- on the data on financials. We do see the light at the end of the tunnel and this positive market trend is also reflected in our sales development. What you see here and you are familiar with this curve already since many quarters and years. The first 2 quarters of this fiscal year as well as the last quarter -- the fourth -- quarter 4 of last fiscal year have been heavily impacted by the crisis with a double-digit decline. And then in quarter 3, we saw already the recovery with, let me say, only the 8.8% minus and then almost a 10% growth into the quarter 4 compared to quarter 4 of last year. This development reflects 2 things. The first one is that we compare the figures with a very low previous year level, which helped. However, the second one is the mentioned global economic recovery, which is also seen in our segment, which has impacted our figures positively. You see it on Page 12, especially the DACH region, the largest market for the Zumtobel Group, reported a 3.8% drop in revenues to EUR 347.6 million in 2021. And the decline was very moderate in Switzerland despite the crisis, notably strong in Germany and Austria, actually managed even to generate an increase compared to the financial year before of 7.6%. The revenues in the Northern and Western Europe fell 12.1% or to EUR 257 million, where here, the declines were particularly strong in U.K., Sweden and in Norway. And in Southern and Eastern Europe, the decline was 7.6% to EUR 267 million with Italy, Czech Republic and Greece reporting the largest declines. Asia Pacific generated the growth, obviously, they have been able to move out of the crisis quicker than the rest, of 2.7% to EUR 108 million. So the rest of the world is mainly including the Middle East, also U.S. and Southern America, which basically come to a complete standstill on a low level. But you see it here, the decline of the 22.4% or EUR 65 million. Looking at the revenue development this fiscal year '21-'22. If we start with the revenues on Page #13, we do expect an increase year-over-year between 4% and 7%, especially in those 4 areas highlighted for growth. On one side, we do see quite a strong recovery on the outdoor, especially in the smart street lighting with a lot of regulatory changes towards climate neutrality. Here, also, it helps us that the 2 countries heavily impacted by COVID, France and U.K., which are strong for outdoor countries, are recovering quite quickly. The second one is the whole light management systems where basically we are able to sell more and more end-to-end solutions to our customers, including our controls and light management system. Obviously, the bottom right, the catch-up, we do see a lot of investment installments now released. U.K. is one of those, partly pushed by government projects but also by the private sector where we see here in Q4 as well as continuing in Q1 this basically a strong recovery. And last but not least, sustainability. As I said, it's not just a word. It's basically all -- or a lot of our clients are now having very clear targets on their CO2 neutrality, and we are working with them and for them to install the highest efficiency in lighting to save cost and energy on the light. So furthermore, we are -- due to the cutting of the CapEx spending during the COVID-19 pandemic, we also see and expect a catch-up effect starting this fiscal year. As you might know, some countries, especially in Austria, have this so-called benefit that the government supports investments, and we see a lot of, let me say, CapEx released what helps us in accelerating the growth. If you look at the Page 14, the bridge of EBIT margin development between last year and this year. We have reported, as Thomas said, an EBIT margin of 4.2% in 2021. But please keep in mind that 2.7% out of the 4.2% came from the one-off effects like the short-time work what we had as well as the lower margin marketing and travel expenses. And these effects are not present anymore. Obviously, when it comes to travel, we are not expecting to get back to the pre-corona level, simply because we do more and more meetings also online. But this is also the effect here. One thing I forgot to mention, this is not anymore the EBIT-adjusted report, we see EBIT, as we, after the 3 years now, have left the situation of restructuring. And from now on, we are reporting the EBIT margin and not the EBIT adjusted margin. So considering the top line effect of around 2% to 2.5% and another 0.5% to 1% effect following further efficiency measures like product platforms that we have installed, the contributions or the first contribution from our digitalization project, we do expect an EBIT margin between 4% and 5% in '21, '22. Looking at Page #15 and following the projected revenue development as well as the potential strategic stock increases in order to tackle possible shortages, we expect the working capital to be between 14% to 14.5% by year-end. And as explained, company shifted their CapEx spending due to the COVID-19. And of course, we did as well. As you see, the economic environment is recovering and getting back on track. Going forward, we plan to invest between EUR 50 million and EUR 55 million. And a part of it is dedicated to the maintenance activities, while the other part is CapEx which was shifted due to the COVID-19. And this CapEx is mainly going into the digitalization as well as the new platforms and new product development, what we will release within this fiscal year. So let me summarize on Page 16, the outlook for the financial year. Revenue grew between 4% and 7%. EBIT margin projected to increase to 4% to 5%. And we keep -- we plan to keep our working capital between 14% and 14.5%. So that means our CapEx spending is projected to stay at a healthy level between EUR 50 million and EUR 55 million. I think those of you who join us regularly still might remember that in previous year we have been higher, but that was also taking into account that we had the huge investment in our large factory in Niš in Serbia. During the crisis, we have also been working on the further development of our strategy, what we incorporated '18 and '19. And in recent years, we have basically put a much stronger focus on customer orientation, introduction and process complexity and therefore costs. And our activities in 2021 also included a constant work on the further implementation of our focus strategy. While delivering on our restructuring cost management program, one key element was formed by the stronger brand strategy. It involved a systematic positioning of the Zumtobel and the Thorn brands through a streamlining of the product portfolio and the more efficient positioning of the brand organization as well as organized -- well-organized interfaces to the key sales and R&D functions. Fundamental, long-term challenges can never be neglected even in a demanding environment. And COVID-19 pandemic and the resulting economic reality led us to the decision to further develop our focus strategy as a means of utilization of new opportunities for growth and strengthen the company position, mid and long term. The result is the new FOCUSED strategy where we have expanded to include increasingly important aspects, like I mentioned already, the environmental issues for the letter E and the digitalization for the letter D. And our goal is not only to create a customer-oriented solution, but also to anchor sustainability even stronger in our action. We, therefore, shifted our current sustainability initiatives more into the spotlight during the last financial year since one of the major goal, what we said to ourselves, is that we plan to become climate-neutral by 2025. And we will work systematically in the sense of circular economy, which is another priority, not only reducing the CO2 exposure but also being able to use material resources as well as efficient minimization of waste emissions and energy consumption. And this will represent now an integral part of our efforts in the earliest phase of product development and subsequently in the construction and the operating supply chain. With this initiative, the Zumtobel Group can and I believe will take a pioneering role in the lighting industry. Digitalization for Zumtobel means innovative products with expanded functions as well as services that creates new customer experiences. And that will strengthen even more the customer relationships that we have in support the development of new earning models for the group. And we are implementing the digital process workflows throughout our company step-by-step, end-to-end from the customer acquisition to receipt of orders, product delivery and aftersales support. For the time being, I would like to stop here and also extend the invitation for our Capital Markets Day, what we plan to host on October 12, '21, where we will give you a comprehensive overview of our focused strategy. And since we do not have -- know how the travel restriction is due to the COVID-19 will develop, our Capital Markets Day will be held in hybrid demand, meaning you may either join the event in person here in our headquarter in the Light Forum in Dornbirn, what we opened last year, or online. So thank you very much for your attention. And now Thomas and myself will be happy to take your questions.

[Operator Instructions] The first question comes from the line of Markus Remis with RBI.

Congrats on the results. A couple of questions, please. Firstly, on your sales guidance. Can you maybe shed some light on the volume versus price dynamics that you've baked in? And also some assumption regarding the regional dynamics would be very helpful.

All right. Yes. Obviously, I think we highlighted it at the beginning. Now as we are over the worst in corona, we have a couple of dark clouds on the horizons, which are related to raw material increases and partly, which will most likely impact us after quarter 2, certain shortages of key components on the component side. Semiconductor components would go into our drivers, which automatically reflected in a situation where the customers are placing orders ahead so that on the components level, we do see a sales development that looks promising as well as on the Lighting Segment. When it comes to the prices, we expect at least for the next couple of months are quite a constant development. Depending on the situation where we are in with increased raw material costs, increased transportation costs, also, we have been partly forced to implement price increases out in the market so that I believe that the sales, when it comes to the price dynamic, will rather be constant or slightly increasing for the time being, at least until the end of this year. In terms of volume, we are expecting a higher volume simply because of the catch-up in the different markets. So driving markets are here, as I mentioned in the beginning, U.K. and France, which are partly back at pre-corona level in the monthly run rate and also on the volume. So that's quite a significant volume increase. And also the component level prices are rather constant. We also saw this in the last year, and we believe that will continue as long as we are in a semi-allocation mode. In terms of -- Markus, in terms of regions, the fastest recovery what we saw is in U.K., in France, also in Spain and in Italy, and it's basically a rather constant development in the DACH region, where, as I said, in Austria, we have the so-called investment premium from the government. We see a significant growth also in the next 2 quarters.

Okay. But why is the DACH region kind of lagging behind in terms of the dynamics? I understand the base effect, but still, I mean, there was a...

With all the data that we have. So we are relying on the statistics from Euroconstruct, and Euroconstruct data shows that U.K. and France is much faster recovering with a positive impact and the latest Euroconstruct data in Germany shows still a shrinkage in investment and is reflected a little bit in our business as well that Germany is not growing that fast, for example, like U.K. and France is doing at the moment.

Okay. So how long does your current order book reach at the moment? What's the visibility? And maybe can we compare that to, say, pre-corona levels?

It's an interesting development because we are now in a phase where we -- where our customers and the whole world sees the shortage of certain components. And therefore, we have partly something what we call the [ globe of the effect ], sorry, the German [indiscernible] customers are placing long-term orders to secure their orders. So the order intake of the component level is currently much higher and also the visibility is longer than it was at pre-corona level. So the order book last already until the end of the calendar year, where in pre-corona level, you had the visibility of maximum 2 to 3 months.

Okay. And would you expect these orders to actually translate then into revenues? Or do you see a high chance of cancelations?

Well, obviously, that depends also. We have a noncancelation policy. It will generate revenues. But obviously, it will then be a revenue that is distributed over a longer period.

Okay. Can we stay on the raw material side and on the part shortages? I mean what's kind of the magnitude of the cost inflation you're seeing? And you indicated that after Q2, if I understand you correctly, you're a bit more worried about the supply side. I mean is there already some evidence that kind of your production and your selling process is hindered by part shortages?

Well, it's like this. So on the component level, the shortage is already starting now, and we believe it will have some impact in our Q2 numbers. But obviously, the teams have done everything to work around certain critical components where we partly have replacement. So I think it's -- what we are currently seeing now, it will be a difficult quarter 2. And depending on the time of allocation and depending how fast we are able to implement the changes, it might get better than after the summer break. But obviously, it's a very critical situation because at the same time, the order intake is overproportional high due to the fact that the customers are also afraid to not getting the part. So it's a little bit difficult to predict exactly how this goes, but the critical quarter will definitely be the quarter 2.

Okay. Last question before I get back into that line would be on the currency exposure as of kind of -- as we enter into the new business here, can you remind us of the main long short exposures, dollar, Swiss franc, that would be helpful.

Yes. Our main short exposure is in U.S. dollar. It is around USD 160 million, mainly coming from Tridonic from the material -- raw material purchased in U.S. dollar. And besides that, we have a shorter or, let's say, that we have rather long positions in the Swiss franc, around CHF 80 million, and in the British pound, GBP 30 million. This is not too much because we have quite a good natural hedge between sales and purchasing in -- Great Britain in our factoring anymore. These are the most important exposures that we have.

Okay. That was always in local currencies of GBP 30 million and CHF 80 million? Okay. Very clear. Yes. And on the dollar effect, apparently, there is some tailwinds in the last quarters. I mean, when do you see that leveling out from a quarterly perspective? So when is the base effect kind of kicking in when your hedging rates will go up?

Roughly in 1 to 2 quarters.

The next question comes from the line of Michael Marschallinger with Erste Group.

Maybe the first one is on the revenue outlook, more on Page 13 of your presentation. It's the first time you also talked about smart lighting, light management. Maybe can you just tell us how big are these sales right now and what growth rate do you see in smart lighting also now and in the next years?

Yes. On smart lighting, that includes also -- maybe I need to explain a little bit to you. That includes also everything what is related to digitalization, illumination around the house, especially when it comes to environmental protection, no light pollution, making sure that we are taking care of the insects and the animals here. And we are currently launching a new portfolio for that application, and we do see quite a substantial demand on that one. In parallel, we are working with different external partners on developing smart city solutions using our connectivity solution in combination with our luminaire. It's a growth field where we believe, over the next year, we will make some substantial progress. But it's, of course, not the dominating revenue driver now, most likely also not this fiscal year but coming in the next fiscal years.

Okay. Understood. And maybe also 1 we already talked about geographies, but the major geographies. But just quickly that coming back to rest of the world was rather weak this year, any intentions Middle East, U.S. wanted to reduce exposure, maybe divest or what are your expectations here?

Yes. Your question was U.S., right? Did I catch this correctly?

Yes, U.S. and Middle East.

So obviously, during the last years, we have streamlined the setup over there, where we have optimized our footprint. For example, in the U.S., we have been shifting from locally made products and what are highly price erosive into the high-end products from Zumtobel, only selective Zumtobel products in the project business. And here, we have been able to stabilize the business and go back to the growth mode. Obviously, COVID, as you still remember under the former administration, was not managed very well. So we had quite 2 quarters extremely heavy in the impact. But that is now recovering quite steadily, including the South American, where we basically do project business driven by international accounts that are partly generated in Europe. And we believe with that lean and very efficient setup, we are able to manage this, and it's also necessary to have this footprint if we want to become and remain an international lighting solution provider for international accounts. Same is valid for Middle East, where we have been going back only into the key countries, and we have removed our activities from not profit-making territories.

[Operator Instructions] The next question comes from the line of Charlotte Friedrichs with Berenberg.

Also congratulations to Mr. Tschol on your achievements in the past years and best of luck for whatever your next projects may be. The first question would be again on the supply chain. And could you elaborate a little bit more why you think that Q2 will be a critical quarter? Are you seeing a worsening of the situation? Or what's the reasoning behind that?

Well, Q2 will be the first quarter where we will see the impact. Let me just start here what happened. So more or less towards the end of calendar year '20, beginning of '21. We saw first an increase of our costs on the logistic transportation cost from east -- from China, obviously then, again, accelerated with the Suez Canal vessel accident. But more or less what led to a quite significant increase of logistic cost, but also longer lead time from products, what has been coming from China, which is quite a lot in terms of raw materials, semi-finished goods and finished goods and our [ luminaire ] level from THORNeco. That automatically then led us to longer lead time and at the same time, an increasing demand. Then obviously, from January onwards, we saw a quite dramatic increase of raw material prices, copper, steel and so on, also plastic granulates and this kind of stuff. And then also at the same time with the old bounce back of the economies, a shortage on ICs and semiconductor devices, which go into the drivers. Obviously, now we see that we are still having warehouses with enough components. But moving forward with the demand, what we have, and the shortage on certain components, we see that this will impact us after, let me say, August, September time frame. And then it depends heavily how fast we are out of this allocation from the market and how fast we are able to convert certain components into other components so that we are able to produce. But the Q2 will be the first quarter what we will see an impact and then it depends heavily how the whole economy goes. Obviously, this is a little bit crystal ball, certain indicators share and show that after the end of summer, October, November time frame, it will ease up a little bit, but others also show that it might last well into the Q1 calendar year '22.

Okay. Perfect. Understood. And coming back to one of the previous questions, can you tell us what percentage of your revenue usually comes from the street lighting roughly?

From the street lighting? So our outdoor business, let me just take it up, but we are roughly EUR 140 million of our lighting revenue for the Lighting Brands, Thorn and Zumtobel, outdoor. And the majority of it is internal elimination. So minor business as far as, let me say, everything what is with stadium, cities, beautification around the house and smart city. The majority is street and [ tunneling ] out of the 140.

Perfect. And then just to make sure that I understand correctly, with the one-offs that you showed on Slide 14 here for your EBIT margin guidance, roughly EUR 28 million, I guess. Can you tell us what components are in there and what your assumptions are regarding, for instance, a return to travel and so forth?

Yes. This 2.7%, this means EUR 28 million in absolute numbers and roughly EUR 21 million are coming out of short-time work and the remaining EUR 7 million from less travel and less marketing. And so that's for sure that the EUR 20 million is a pure one-off effect. And out of the remaining EUR 7 million, maybe there will be one -- or let's put it differently, 2/3 also will be -- we will no longer have or will be a one-off effect -- sorry, sorry for that. To make it easy, half -- roughly half of the remaining EUR 7 million will be a sustainable one-off -- will be one-off effects, sorry, and half of it will come -- EUR 3 million to EUR 4 million, we will have in the next year due to more travel and also more marketing expenses compared to past year.

[Operator Instructions] The next question comes from the line of Laurent Stöckli with Quaero Capital.

This is Laurent Stöckli from Quaero in Geneva. Congratulations for these figures and especially for the strong free cash flow. Maybe could you give us a midterm target for the EBITDA margin by business unit for the Component and Lighting business?

Regarding the EBITDA midterm plan, we're working on that and what Alfred said, there was the Capital Markets Day in October, and there we will be -- we will give you the details on that at this point of time. But maybe just one comment. I think this is also important to have this in mind when looking at Page #14 is that the pre-corona level in terms of net sales was EUR 1.180 billion. So this means that getting back to the pre-corona level will take roughly 2 years. And so in the next fiscal year, we are halfway. This means -- and -- but we have the structure and I would say the cost place this year is in place. And then getting back to the pre-corona level, at least EUR 1.180 billion, this would mean depending, of course, on the markets where this catch-up will take place, et cetera, that roughly EUR 35 million in additional EBIT. So -- which corresponds to 3% of EBIT margin. So meaning translating this into the pre-corona level, we would be between 7% and 8% to make a very rough calculation. And I think this is the good news here. Maybe at first sight, it could seem a little bit disappointing, why only 4% to 5% next year where we had 4.2% in the last financial year? In my opinion, it is not, especially also in the light of the challenges with the raw material shortages that Alfred already explained in detail. From my point of view, this is, so to say, a transition year to getting back to the pre-corona level at a much better profitability. As for the -- regarding the EBITDA margin in the midterm perspective, please, we will do that on the Capital Markets Day.

The next question is a follow-up question from the line of Markus Remis.

One more related to this strategy update. I guess you will elaborate in detail at the capital markets, but is there any snapshot you can give us in terms of investments needed and kind of the whether there is a step-up in R&D expenses needed to deliver on these E&D targets, which you have outlined here on this slide. So -- or will that be kind of -- yes, will you keep the known pattern in terms of R&D and investment needs?

I mean what we have done already, Markus, here in this fiscal year that we plan to continue is a stronger investment in R&D, especially in our innovation products and platforms on one side, and there is a big plan also here on the digitization there. Obviously, investment has been already released, and this will be continued over the next year and the details we would like to share then during the Capital Markets Day on this year. On the environmental setup, that's also then influencing the whole investment on R&D and product development taking into account the reuse, the circular economy, which will also require additional investment.

Okay. But in terms of the kind of historical ratios, I don't know, CapEx to sales, I think it's something like 5% or so, will that be sufficient to deliver on this midterm targets?

We believe so because, obviously -- and maybe that was not crystal clear. With the sharpening of the brand positioning and the underpinning platform strategy, what we have, we have already seen for those platforms that we have released like a moisture-proof platform or a standing -- freestanding luminaire platform, that with the same amount of R&D, we can serve 2 brands differently positioned. And we have here a much more efficient setup. So we believe if we -- we are not reducing the R&D, we are keeping it constant, slightly increasing, but the efficiency gain that we have only based on this platform strategy for the 2 brands is quite substantial.

There are no further questions at this time. I hand back to Alfred Felder for closing comments.

Yes. Ladies and gentlemen, thank you very much for listening to us. Thank you very much for the interesting questions. With that, we come to an end on this call. Again, I would like to extend the invitation for the Capital Markets Day. We obviously will go do a deep dive on the initiatives what we have started. We will also have more to be shared with you. And I'm looking forward to see you, at least online, hopefully, on October 12. Thank you very much for your time.