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Jenoptik AG
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Good afternoon, ladies and gentlemen, and welcome to the Jenoptik conference call regarding the first 9 months results 2020. [Operator Instructions] Let me now turn the floor over to your host, Dr. Stefan Traeger.
Thank you very much, and very warm welcome from our end here in sunny and lovely Jena. Great to have you all. With me today in the room is, as always, Hans-Dieter Schumacher, CFO. Firstly, let me please point you to our safe harbor statement, which can be found on Page 2 of the presentation. I'm not going to read it out in the entirety, but you can find it in the deck. Please do follow me to Page 4 of the presentation. The first 9 months of 2020 certainly have been quite a challenging time for everybody out there. And at Jenoptik, we're no different than many, many other companies. Overall, though, I would say that given the circumstances, our third quarter was actually quite improved versus the second quarter of 2020. There's EUR 176 million roughly in sales. We're up by around EUR 11.5 million or 7% if compared to the previous quarter, Q2 of this year, but we're still below Q3 2019. Year-to-date, we posted sales of EUR 505 million, which is a decline of around 13% versus prior year. Order intake, and I think that's a fairly positive signal, order intake in the third quarter, the isolated quarter, had been at EUR 177 million, which basically does mean that the order intake has stabilized roughly at last year's level. Year-to-date, we are still down by minus 8.5% versus prior year. What makes us pretty hopeful, though, is that, in particular, at the end of the quarter, particularly in September, we could book some very important orders, not to -- in particular, an order for our Light & Production business, which I'm going to explain later in the presentation, but in simple terms, a large order for a Spanish company that is building out a plant here in Germany for electro mobility. Therefore, it's important for us as it does show that we make inroads and progress on our strategy to utilize our Automation & Integration business to go through more of our legacy products. So order intake, as I said, overall, 500 -- almost EUR 511 million, again, down versus prior year. But our book-to-bill rate is slightly above 1, which, again, we do see as a bit of a promising sign. Our profitability has improved quite significantly, actually, in the third quarter versus prior quarter's profitability in terms of EBITDA or adjusted EBITDA or operating profit, as in at 18% of sales in the isolated quarter. And for the year-to-date figure, it does bring it to 14.1% of sales in adjusted terms, which, again, I think, is a good performance of our operating businesses. We have focused in the first 3 quarters quite a lot on free cash flow, and we've discussed that with you all quite a number of times. Free cash flow is very important for us at the moment, in particular, because we want to maintain our good balance sheet position, our liquidity position. We have a strong balance sheet. We have a good liquidity position. And our power to generate EUR 18.5 million in the first 9 months, I think, is a demonstration of what the business is capable of even in those definitely challenging times. Let me also point you one more time to the acquisition of TRIOPTICS. We're very, very pleased that we could close the acquisition of the first 75% of shares in TRIOPTICS at the very end of the quarter. TRIOPTICS had little to no impact to our Q3 numbers, really, because which is -- the deal has been closed in the last few days of the quarter, but it will certainly lift us up in the fourth quarter. TRIOPTICS, as explained previously, is indeed the gold standard of -- provides products that are the gold standard when it comes to test and measurement for optics for mobile devices. And we talk about augmented reality. We talk about virtual reality. We talk about essentially the digitization of our world. And if anything, then the COVID-19 pandemic has certainly -- yes, it acted a bit like a catalyst, actually, for that digitization of our world. So we're really, really pleased with the fact that we could close that acquisition although [indiscernible] the first 75% of shares by the end of the quarter. With that said, let me turn you over to Hans-Dieter, who is going to take us through the numbers in more detail.
Yes. Thank you very much, Stefan, and a very warm welcome from my side to all of you as well. Please follow me on the next slide, Page #5, in our presentation. And here, you see the 2 KPIs looking a little bit ahead, so to speak, and the order intake on the left part of the slide and order backlog on the right side. And as Stefan just mentioned, in Q3, the order intake has been on the prior year's level with EUR 177 million like in Q3 last year, and the reason was a good order intake development, especially in December in Light & Production. So accelerated over 9 months, we are at EUR 510.9 million, which is a minus of 8.5% only if you compare it with our sales development. And therefore, our book-to-bill ratio is a little bit above 1, 1.01, which is better than in the prior year. And if you look at the order backlog, it's up to plus 6.9%, roughly -- shortly below EUR 500 million, EUR 496.7 million exactly, which is also driven by the acquisitions of INTEROB Spain and TRIOPTICS with EUR 51.4 million. And we assume that 45% to equal percentage like prior year will be converted to revenue in this year. This gives us the confidence for our guidance we had published recently. If we then look at the revenue split over the quarter on the next slide, #6, we see that the EUR 176 million, we are still clearly below prior year in the quarter, minus 15% in comparison. And overall, for the year, it's minus 13.1%. And the prior year, we have adjusted because there -- we had HILLOS still in, and we have taken it out now for comparison reason because it's no longer consolidated in this year, as you know. So what is the main development overall, and Stefan will show you the divisional development-led analytics, but I can say here, the semiconductor equipment industry and the public sector customers have continuously showing a good development in the business. We have an impact of significant reduction in our Light & Production, our automotive industry business as well as in the aviation and biophotonics areas, and Stefan will explain it to you a little bit later. In terms of contribution of the acquisitions versus the 1 -- first consolidation impact we have seen in the first 9 months, an impact of INTEROB with EUR 9.5 million and TRIOPTICS, because we have consolidated it only at the end of September, the last week, was only EUR 0.9 million. For the rest of the year, we assume, in total term, about EUR 25 million we will see it lay down, but it's important to know. Stefan mentioned that TRIOPTICS has no impact in the P&L, but it has a huge impact already in the balance sheet. You will see it later on. I just want to mention it. This is only the P&L perspective, but the balance sheet is a little bit different, but I can explain it to you later on. So here on the next slide, we see the development of our revenue in the different foreign regions, so to speak, with the Americas. In Germany, by the way, the biggest minus development, so to speak, and it's driven mainly by automotive, by Light & Production. But in case of Americas, it's also coming from Light & Optics because we have our cinema and our business with the entertainment parks. Yes, thank you. Entertainment parks and cinemas. There we have -- because of the COVID-19 pandemic influence, nobody -- no cinema is open, and no park is open. So this is why the business is coming down there in this year. So this is clearly COVID-19 impact in the year. If you then come to the next slide, #8, you see the profitability of EBITDA and EBIT, which improved step-by-step in case of EBITDA and EBIT every quarter significantly in this year, ending up at EUR 31.7 million in Q3, which was relatively close to the prior year. And the adjusted EBITDA margin communicated reached 14.6% after 9 months. Even if we don't adjust, it's EUR 66.6 million or EUR 13.2 million. So the difference is -- which we have booked is EUR 7.3 million for portfolio measurements and structuring cost -- restructuring costs, which we have explained to you throughout the year. It's mainly driven by M&A, which is nearly half of its M&A cost that we targeted. So [indiscernible]. Then you see the EBIT development, the EBIT development is also in the same shape, so to speak. It's improving quarter-by-quarter and reached EUR 20 million in Q3. The adjusted EBIT margin is now at 7.8% after 9 months. Prior year has been 10.2%. In the EBITDA, you see the impact of the purchase price allocation effects with EUR 5.9 million compared to minus EUR 4.9 million. Prior year, it's EUR 1 million more, and this EUR 1 million is driven by the INTEROB acquisition, which we have done in February and which has increased the purchase price allocation effect so far. The impact of TRIOPTICS is still close to 0 because it's only booked the last week of September. So at the moment, it's -- the increase is coming from the acquisition from INTEROB in Spain. And if you will ask me the question, I can give you an answer later on in the Q&A session about the further PPA impact for the rest of the year for Q4. The not adjusted EBIT is EUR 32.7 million or 6.5%, and this is also very important for us, and we see it on the next slide. If it comes to the P&L in more detail, number -- Page #9, you'll see here the P&L of the group, and let me start on the very bottom line. You see the earnings per share at EUR 0.43 per share on earnings after taxes of EUR 24.4 million, and it shows you that we clearly -- in deep black figures, and our intention, our clear commitment is that we stay black for the full year, even taking the adjustments into account. So meaning net debt reported, we will be clearly in the black figure at the year-end. And what is important to know, and it has an impact in -- especially in the Light & Production development in Q3, you see the earnings have improved. What did we do? We prepared ourselves in the first month for short-time work in Q3. The impact of short-time work have shown a significant better result, mainly in Light & Production, because in the first month, we have to take in -- the people to ask to take the hours. They have booked an account and prepare ourselves for a short time. And you see the positive impact of this measurement, especially in Light & Production division in Q3, which has the -- you see here the functional cost. The functional costs are down by EUR 10 million. In percentage, it's 7.5%, roughly EUR 10 million. It's EUR 136.1 million compared to EUR 147 million -- EUR 11 million, equaling to minus 7.5%. And it's not driven by R&D. If you take R&D output, meaning, the reported R&D costs in the gross margin line, because we have some R&D costs with customer relationships, then we are on the level of prior year, all in all. But in selling and administrative, we saved and in production area as well in [indiscernible]. The tax rate is at 17.5% compared to 21.5%. And also, a little bit -- the cash effective tax rate is a little bit higher because we have very positive results outside of Germany where we have the tax group. But all in all, we are quite happy with the earnings per share of EUR 0.43 per share. If you then come to number -- Page #10 with me. This is the cash flow, the free cash flow of the group. And this is one focus area for us. We have managed the free cash flow, and our free cash flow is operated -- from operated activities minus investments. [ This is a silo ] in our definition. And we have invested nearly the same the prior year with EUR 27.9 million compared to EUR 31 million last year. So we've managed our free cash flow in the positive area, clearly turnaround, up to minus EUR 7.3 million. Now it ends up the quarter at EUR 13.4 million. And if you take the costs for M&A and other restructuring and portfolio measurement out, the adjusted line would be even EUR 18.5 million. And here, on the right side, in the commentary, you'll see some remarks, which -- showing you the impact of TRIOPTICS now on the balance sheet. You see that the net debt grew to EUR 242.3 million because of the 75% we pay for TRIOPTICS. So we have a clearly much, much longer balance sheet now, which is an increase of more than EUR 300 million coming from TRIOPTICS. And we have a goodwill increase of EUR 216 million coming from TRIOPTICS. We have now roughly around about EUR 400 million goodwill and nearly EUR 700 million own capital with a loan -- with a EUR 1.1 billion balance sheet. So you see the ratios. And as to the results of the 3 quarters of this year and the last quarter last year in the equity ratio calculated, so to speak, the 49.4% is the momentum because of the COVID-19 year. The low result, this will improve throughout the years to come. But there you see the impact of the longer -- much, much longer balance sheet, and the small impact of the recycle of TRIOPTICS, you see it here in the equity ratio as well. So here in the balance sheet, you clearly see an impact of the acquisition and the first consolidation of TRIOPTICS. Having said this, I'd like to hand over again to our CEO, to Stefan, who will go with you through the development of our divisions and give an outlook for the rest of the year. Stefan?
Hans-Dieter, thank you very much. Let's get started right away with our largest division, Light & Optics. So please do follow me on Page #12 of the deck. I think most important for our Light & Optics division, as always, is how the semiconductor equipment industry developed and our semiconductor-related business developed. And I'm pleased to say that for us, semiconductor equipment industry remained really robust. There is no glitch to report. Our semicon business is in a very good shape and remains to be strong. We do continue to see declines in the biophotonics area, though, in the life science and health care industry. And that's a bit counterintuitive, I think, for many of you, although we have discussed it in the past already. But essentially, it's due to the fact that a large part of our biophotonics business is actually in aesthetic procedures. And during the time of the COVID pandemic, little people actually go to their local dermatologists to try and get rid of a tattoo or get rid of hairs. And also, LASIK eye procedures are down. And all of that has an effect on our life science and health care business. And thus, overall, for the group, for the Light & Optics division in total, we do see revenues decline by around 11% year-to-date. However, our order intake remains on a fairly good level. The order intake for life science is -- was EUR 214.6 million, essentially at last year's level, which is great. And we have a book-to-bill rate here above 1, which, again, does indicate that we are actually in fairly good environment when it comes to our Light & Optics division. We do see that the EBITDA impact after the decline of sales is actually fairly little, and that is to do, yes, on the one hand, is cost-cutting measures that we have initiated and very stringent cost control. However, I think it's also fair to say that we do have a bit of a mix effect here, product mix effect. Essentially, those of our product lines that have a relatively high profit margin are in good market conditions. And we see those businesses and product lines down that half or that do carry lower margins anyways. So that in total, the EBITDA margin and percentage of sales actually is up by quite a bit, as you can see in the presentation. And the effect on the absolute EBITDA figure is fairly minor. We're also proud to be able to report a very strong free cash flow for our Light & Optics business, which, again, helps us to basically make sure that despite the investments that we do in this business, we actually have a very good liquidity position and a very strong balance sheet for the whole group. So overall, despite the fact that we did see revenues declining by 11% in the first 9 months, we're actually sort of okay with how the business went and, in particular, glad that we do see semiconductor equipment industry to remain really in a very robust environment. Let's go to Light & Production, obviously, the business that is exposed to the automotive industry, and the business that's hit the hardest by the turmoil in that industry in the last 9 months. I would like to say the problems in the automotive industry overall are not just COVID-19 problems, right? I mean when we talked about biophotonics, biophotonics problems that we have is really just a pandemic effect. It's not a sustainable or it's not a strategic problem we have. Here in the automotive industry, for our Light & Production division, things are actually a bit different. There is a transition in this industry going on, and the problems in the automotive industry essentially just sort of amplified by the impact of the COVID-19 pandemic. For us, I would say that the third quarter actually went a bit better than the second quarter. In particular, when it comes to order intake, obviously, as I mentioned earlier, we are really proud that we can report this fairly large deal. We could report this fairly large deal at the end of September for a customer in Spain, Gestamp. The equipment, though, is going to end up in a German plant by really a household name, a new plant helping to produce e-mobility cars. So we're participating in the trend to more alternative engine vehicles and the trend for more sustainability in the way we all do our mobility here. So we're really proud of that, in particular, since it also shows that our strategy for automation integration, i.e., for Prodomax and INTEROB, our strategy to use those as, shall we say, an additional channel into the industry and an additional way of pulling through our legacy business actually works. We have more of those orders in the pipeline. Of course, we always have to see whether or not we can pull them in and convert opportunities into real orders. But we have a number of that type of business in our order pipeline, and that makes us actually looking forward a bit more hopeful when it comes to our automotive business. So as to say, order intake was EUR 121.7 million, down versus prior year by 23.3%. It's not nice, but at least the second -- the third quarter did show a bit of a stabilization here. Revenues are down by 30%, 30.4%, to now EUR 119 million. It does mean, though, that the book-to-bill rate is above 1, which reflects again -- or is reflected again also in an uptake in order backlog, in particular, of course, driven by our relatively new businesses in the Automation & Integration area. Hans-Dieter already mentioned the EBITDA or the operating profit figure has stabilized somewhat in the third quarter, in particular, due to the fact that we do get some questions from the furlough schemes here in Germany and around the world, which, of course, we use. Nevertheless, it has to be said that Light & Production has produced a slightly negative free cash flow in the first 9 months. We have to see how that develops in the rest of the year. That doesn't take away anything from what we said earlier, i.e., we have no intentions, shall we say, to have a negative free cash flow for the group. I think it's been said a number of times now. For the whole of the group, we do see black numbers. We do not see any sort of negative profitability numbers for all of the group. But in Light & Production, we actually do see negative free cash flow and EBIT numbers. With that said, let me talk to you briefly through the other 2 divisions, Light & Safety. There's actually little to say to Light & Safety, to be honest. Light & Safety is in a very good shape. We see a good order -- sorry, good sales development. Revenue is up by 9.3%. We see a very strong margin effect there, obviously, driven by the higher volume, combined with stringent cost, cost measurement and cost management. We see free cash flow being -- going in the right direction. The only thing to point out is maybe the order intake, which is down, but that's a very normal behavior in this project-driven business. As you all know, quarter-to-quarter changes and varies with large tenders, so we either win or not. Hopefully, this time, we actually win them, but they don't come every quarter. So order intake is down in the first 9 months, but it's not anything that we're -- makes us very much -- because, again, as I say, overall, the demand is good, and it's more sort of a lumpiness in the project-driven business. Other than that, Light & Safety in -- with good tailwind and fairly calm business waters. In VINCORION, the last division that we want to talk about, we do see almost like a bifurcation in the marketplace. VINCORION caters to customers in the aviation industry as well as, as you know, to customers in the defense business. Now whilst defense is typically a very stable business, and we do see that as well with very stable order intake patterns, the aviation business is actually hit pretty hard. It was not that much of an impact or it did not have that much of an impact in the first half of the year simply because it's a very slow-turning business, a very slow-turning market. But it did show impact in the third quarter in order intake. To some extent, we have seen challenges with our customers in aviation, namely, Airbus and Boeing and a couple of other customers there. So we see, as I say, aviation being down but the defense business being pretty stable. And overall, the order intake is essentially at last year's level. It is down somewhat by minus 2.6%. But given the fact in the aviation industry, that's fairly okay. Revenue is down minus 6%. Essentially, again, here, it takes us just quite a while until we can turn orders into sales. And that, by the way, is an issue that we have across many of our businesses. We haven't mentioned that in the early part of the presentation, but we do see that as well in Light & Production and in Light & Safety. If we get an order now, it's not going to turn into sales by the end of the year. So any orders that we get now will become sales in 2021 and beyond. So essentially, we have a timing issue here. And we do see that very same behavior in VINCORION, in particular. EBITDA margin is slightly down in VINCORION. It's essentially driven by product mix. And free cash flow is negative. There's not that much of an unusual behavior and pattern. We had the same pattern last year. It's not as much down as last year, if that's any good. Still, free cash flow is negative. Again, it's a bit better last year but still in the negative territories. We do expect it to catch up somewhat, of course, in the fourth quarter. But we got to be a bit careful here. We will catch up in sales, and that will obviously turn into accounts receivable. And we have to see to what extent we can actually generate free cash flow. That remains to be seen when it comes to VINCORION. We have large shipments in the fourth quarter, typically, in that business. And again, as I say, that often ends up in accounts receivables at the end of the balance sheet period. Nonetheless, if you take it all together and integrate across our businesses, and as I said earlier, I think it's fair to say that, yes, the third quarter has shown stabilization in order intake essentially being at last year's levels. And it has shown revenues and sales up versus the second quarter but still below the third quarter -- or sorry, below the third quarter of 2019. Third quarter has seen improvements -- or further improvements in our margins. And overall, we think that our profitability is on track compared to what we see in other participants of the industry. So that we look forward to the rest of the fiscal year. We now anticipate including TRIOPTICS revenues to be in the range of EUR 755 million to EUR 775 million and an adjusted EBITDA margin before PPA effects of between 15% and 15.5% of sales. We have initiated a number of projects for structural and portfolio adjustments, and we believe that they should contribute to accelerate growth and improve the group profitability starting next year already. Just to give you a flavor already right here. We believe that the sort of the onetime effects or the difference between orders and adjusted EBITDA will be, in the fourth quarter, maybe even higher than what we have posted thus far this year. So we will see quite a significant chunk of money spent on making our business better for what comes in 2021 and beyond. With that said, let's pause here, and we're looking forward to receiving a number of questions from you. Thank you very much.
[Operator Instructions] And the first question comes from Jürgen Pieper from Bankhaus Metzler.
I have 2 quick questions. The first one is on the acquisition of TRIOPTICS. Is it right to assume that PPA next year will be around about EUR 2 million? Sorry if you said that in your presentation. I might have missed it. And secondly, I look at your cost structure. Your admin costs went up these first 9 months from 7.5% by 100 basis points to 8.5%. Maybe this is my assumption that this is a question of higher expectations at the top line. So maybe you were -- and with your guidance, you said more or less that you expected higher revenues until recently, until a couple of weeks ago. So would you say that on that level on administration costs, you still have to do something to become -- maybe look a little more efficient to that?
Thank you for your question -- questions in plural, actually. Let me just start with the cost structure and the G&A, the admin expense. Yes, I think it's fair to say that we had high expectations on the top line when we came into the year. And we do work on our G&A, as always. But yes, in percentage of revenue, it's -- we can't take that down fast enough, essentially, if that makes sense, to compensate the decline in revenue versus what you originally anticipated and, actually, versus [ positive number ]. I mean let's face it. We do see a decline in dates here, and that, of course, has an impact. We continue to work on our G&A expense. We have a project called [ Speed ], actually, where we work pretty significantly on our cost structure in terms of G&A. We are certainly hopeful that next year, we will see the positive side of that. This year, we're going to spend on managing down the cost structure, and we hope that next year, obviously, we will see a positive effect and a decline in our G&A.On the TRIOPTICS, no, we have not said that. I don't think we have said -- we have given you a number here. I don't think...
I can give an indication.
Maybe we can give an indication.
Yes. I can give you an indication. In the quarter 4, we will see the major impact coming from TRIOPTICS. And this year, we assume that we -- and it's still a work in process, you know. We have done the opening balance, and we have done a purchase price allocation calculation, but it's still work in process. We have to talk to the finance colleagues at TRIOPTICS and to fine-tune it over the weeks and months. But today's status and it's relatively sure we will have another EUR 3.3 million inventory step-up impact in the EBITDA in Q4 coming from TRIOPTICS. So that the -- coming the end of this year, the inventory step-up, EBITDA relevant purchase price allocation impact will be roughly around EUR 4.2 million, EUR 3.3 million from TRIOPTICS and EUR 0.8 million from INTEROB. And with this swallow out of the bottle in this year, we will have only EUR 1.3 million, EUR 1.5 million next year, the rest from TRIOPTICS, so to speak, yes? So the main part will be done at the end of the year, concerning the EBITDA impact. The overall EBIT impact will be around EUR 40 million in this year with Prodomax, with INTEROB and with TRIOPTICS. And then next year, it will be around EUR 15 million, yes, in the EBIT. And then it's going down year by year. It's stable at around EUR 12.8 million, EUR 12 million. And after 25, 26, it will slowly disappear, yes? This is an indication concerning the purchase price allocation impact, yes?
The next question comes from Malte Schaumann from Warburg Research.
Yes. Let me start with VINCORION, [ government posting ]. The business development had been a bit slow also, and then sales generation in the first 9 months and also in order generation, right in the first quarter, but in the past 2 quarters, Q2 and Q3. So maybe you can give us some more flavor. How do you see the pipeline? And then other realizations ahead of you?
Yes. Certainly, Malte. On VINCORION, I mean, again, the challenge is in the aviation business. I think with the pipeline in the defense business we look at, we can all speculate what political changes and what that means, but we're not here as a commentator for political development. All we can say is that certainly, the aviation industry is hit pretty hard, actually very hard by the COVID-19 pandemic. And we do see that pipeline, we have our challenges there. I don't think that, that's going to go away in the fourth quarter. On the contrary, I think that's rather becoming probably even worse because, again, that's a business that has very slow-turning business cycles. So I would say that the fourth quarter for VINCORION will be, when it comes to order intake, probably challenging. The other -- I don't -- I couldn't quite hear you. Your sound was a bit bad. But what's the second part of the question, actually, Malte?
Yes. Actually, the same referring to this period. So development has not been pretty strong in the first 9 months. [ You may put it strong recorded ] [indiscernible].
Essentially the same comment there. It's the same effect, essentially. We'll have a couple of -- we're working on a couple of large deliveries for existing contracts, which will hopefully -- we will be -- hopefully, we will be able to turn them into sales in the fourth quarter, ending up in accounts receivable at the end, maybe. But again, it's the same essential development, aviation being down, defense business being okay. Given the project nature of the business, we will see revenues on -- invoice sales coming in more in chunks in the fourth quarter. But I would not think that VINCORION is going to be able to grow its business this year.
Yes. Sure. Okay. And then on the cross-selling, you mentioned in the Light & Production area, you start to [ see it begin ]. It's a growth for the latest system and for metrology and the automation project. And is metrology both for optical and then the nonoptical [ levels ]? Or is there some kind more opportunities in a lot of these technologies than others?
It's laser processing.
Yes. Okay. Okay. Good. And then maybe a question on the -- last question for me would be the pipeline in Light & Production. I mean order intake was quite good in the third quarter, EUR 56 million. So any -- so yes, maybe some comments on the pipeline. You had, had deals that were kind of exceptional or do you think that, that level could be -- could prove to be sustainable then in the fourth quarter? And some more color on that would be appreciated.
Yes. I mean you guys know me as being a bit maybe sometimes on the conservative side when it comes to communication, I tend to be a bit careful in sharing our good news or opportunities. But we have more of those orders in the pipeline. No, it doesn't necessarily mean we win them. We would need to actually land them and turn opportunity into order intake. Therefore, we're a bit careful. But we have certainly more of those orders that we've just closed at the end of -- like we just closed at the end of September in the pipeline. And that would mean that if we can land 1 or 2 or however many of those potential projects, I know fourth quarter in order intake in Light & Production should be, yes, also improved versus prior quarters, let's say. And we have discussed a number of times that there is -- I don't want to pour too much sort of -- yes, water here into the drain. But we have to say, I think it's fair to say that there is change in behavior in the customer side when it comes to terms and conditions. Often, we do have to prefinance those deals, which does drag down our cash flow. We have, fortunately, other businesses that produce very strong cash flows, which we can use to offset the negative impact in Light & Production. I don't -- you didn't even ask the question, but I'll answer it anyway. So it does have a negative impact for Light & Production on the free cash flow side. We think that there are certainly more of those projects in the pipeline, all concerning automation integration, i.e., Prodomax and/or INTEROB and our laser processing business together. Same structure, and we'll have to see, but we are hopeful that we can land some of them maybe in this year still.
Okay. So a quick follow-up. Do you think that you gained orders because you're able and willing to prefinance products where competitors might not be able or not willing to prefinance to the same extent?
Yes.
The next question comes from Richard Schramm from HSBC.
Yes. Maybe I have missed it, but as you said on Light & Optics that you have here, in some areas, low capital utilization, but profitability was still improved. So obviously, then, this was a product mix thing. And my impression is that, especially in the semiconductor business, which has been holding up quite well this year, has become -- yes, more or less the only bright spot here in this area. Is this wrong or is this right? So how dependent are you on semiconductor at the moment? I would be interested in. And second question concerning the projected savings from your structural measures. You haven't put a number to that so far, but it's -- of an estimate in the area of what you have, yes, in this year, structural measures, as on the negative side and kind of indication we can take forward as possible savings from next year onwards. Or is this a misleading assumption?
Very good questions. So to the first one, I mean we can discuss the language in terms of the only bright spot, but essentially, you're right. The one spot in Light & Optics in the legacy business, that growth and the other 2 are not showing growth. So therefore, definitely, you're right in that assumption, also in the mix assumption that you had. I would say, though, that I think TRIOPTICS, which is not in the figures yet, I give you that, it's going to be in the figures starting -- more or less starting Q4. Of course, the last few days, but essentially, starting Q4, I'm pretty sure that TRIOPTICS will be another very bright spot in our portfolio in Light & Optics. And yes, our life science and health care business or biophotonics business is under pressure for reasons discussed. And the industry business, we also discussed quite a number of times. Although, in industry, at least the profitability is up somewhat, but market is tough here. In terms of effectively -- or positive effect of the restructuring in 2021. Now you will understand that we can't give you any figures here because, again, we have to discuss that with our Works Council and the Advisory Board and the like. And I think it's customary in Germany to do that first and then to -- before we publish numbers here. Where you have an interesting trend of sort, being that can we assume that what we spent this year, we save next, I would say, no, not quite. Just the effect typically comes in a bit later. Yes, we can put some accrual. In our balance sheet this year, we can put some accrual this year already. But it takes time until, yes, essentially measures trickling and flushing through the P&L. Typically, it takes about 2 quarters, shall we say. And I think that gives you at least an idea of an order of magnitude that we can think of in 2021. It would take about 2 quarters, and there are about 2 quarters left where we can actually have the savings. And then in 2022, we have it in the entire [indiscernible].
The next question comes from Craig Abbott from Kepler Cheuvreux.
I actually have quite a few questions. I'll try to keep this concise. Yes, I'd like to hear a little bit more insight on the inventory jump. I understand this consolidation of TRIOPTICS. You also alluded to the fact that in automation and prefinance some of these projects. I just wondered if you could give us a little bit of your thinking on how you see your working capital intensity moving structurally going forward. It moved up quite substantially in Q3, although it was quite high Q3 last year, and then you had the big free cash flow swing in Q4. First of all, you could just give us a little bit of a short-term indication, just a feeling, at least, of what kind of swing in that free cash flow we can maybe expect in Q4. And then looking a bit further down the road, what are you thinking in terms of your working capital intensity levels? Second question -- yes.
If you have a bunch, which you typically have, then you better...
I'll stick with 4. But okay, yes, there.
And so do I. And so do I. They're always very good questions. So absolutely. Keep shooting at it. Absolutely. In terms of the inventory jump, I mean we do have the effect of the consolidation, that's for sure. And then TRIOPTICS, we have, of course, the effect of preparing ourselves for a pretty, pretty large Q4. So it's actually really material that we bring into the business in order to be converted into sales in the fourth quarter. I don't know if you have any sort of details there. I'm looking to Hans-Dieter. But I think that's sort of about -- at least it's probably not what we're thinking about. Now the big question when it comes to working capital, of course, is how much of the sales in fourth quarter ends up in accounts receivable and how much we can actually turn into cash flow. And we have discussed in the last few earnings calls, we do use some measures to say -- to help our free cash flow in terms of factoring and a couple of other measures, but mainly factoring programs, which is a pretty normal thing, and by the way, at the moment, doesn't cost a lot. But we would -- we do want to put a lid on that. We don't want to go reckless here. And I think that's what we have to see how we manage that in Q4.
How much was it in Q3?
Pardon?
Factoring? The factoring, how high was it?
In last year Q4 or...
The overall factoring program can reach maximum EUR 25 million. And we did not use it fully last year. We ended up at EUR 19.9 million, EUR 20 million. And it's depending how the development of this Q4, in this year, the quarter 4 will be. We see that more and more -- that's into December, so to speak. And then if the impact will be realized that we change inventory against late receivables, maybe we increase a little bit to EUR 25 million. But we have a cap -- internal cap for factoring program not to go over EUR 25 million, yes.
And on the more structural side, I mean there you've got a point. I think given the changes, in particular in the automotive industry, it does mean, essentially, we will have to hire -- we have -- that it has an impact. I think that's fair to say. It has an impact. On the other hand, us being able to finance it, and given that there's very little, if not even negative, interest rates on capital, we can use it to gain market share and, hopefully, with the good old profit impact of market share theory, will also help us to actually improve our profitability. Those projects are actually often very profitable if you're able to finance them. But yes, there is a strategic and long-term effect on that, which the big question to me, actually, is how does that influence the whole industry because there are many players out there who cannot do what we can do. And I mean I think it was -- was it Malte who asked about do we believe that we get business because of that? Yes, we do, actually. And -- yes. But again, I'm not here to comment on German politics, but it's certainly something that will affect or might affect the whole German [ current reaction ]. Next question, Craig?
Yes. The next question was you talked about quickly the exceptionals. I mean the restructuring will continue within Q4, how quickly we can expect that to feed through in '21 and '22? But I just wanted -- I know you can't talk specifics, but can you give us a little bit idea of types of measures these are and in which businesses? And how especially you think that might help you grow fast? That would interest me.
Yes. I think that's a very fair question. So we have talked a lot about G&A in the past already and the programs that we do run to make our G&A lighter. And yes, I mean that's one effect. We continue to work on our G&A. We have to -- I'm very convinced that we have to continue to manage down our G&A. It's still too high. In particular, if you compare it to, say, our R&D expense or even our sales expense, I think G&A is too high and we have to manage that down. From a more operational point of view, the business that's certainly affected the most at the moment is industrial metrology, our metrology business for the automotive industry, where we predominantly have product to help measure surface quality in geometries for mainly combustion engines. That is really a structural project -- or structural challenge. So you will see, certainly -- we will certainly see a decline in workforce in that business to adjust the capacity to the demand out there in the marketplace. The other measure which is almost done, actually, already is we want to do some site consolidation. We talked about that already. We mentioned in the last calls, [ simply ], we intend to close down one of our factories in Berlin and actually consolidate the 2 factories and build them into one. We're almost done with that. I think we will be done by the end of the year. So that will be a positive effect in 2021 for Light & Optics. We have also already agreed with the Works Council, the restructuring in another plant here in -- to India, actually. It's not as much. It's not that big a number, but it does have an impact. There's a small place called [indiscernible], for those of you who might know, which is -- we have agreed that already and we're in the execution stage. So that will help, this plant, also to be more profitable in 2021. That's, again, Light & Optics. There's some effect on VINCORION as well. VINCORION will see -- yes, we will need some more structural -- or making it structurally better because, again, the aviation industry is in turmoil, and we don't see that coming back in any near future. So we will see some meaningful restructuring effects in VINCORION as well. But again, the bigger effect is actually going to be on the metrology side for Light & Production and, of course, on our G&A.
Okay. Next question, I got -- I'll keep it to 2 remaining right now. The TRIOPTICS backlog was EUR 24 million. This is the first time we get really any numbers on TRIOPTICS since consolidation. I just wondered how long is there visibility typically and how does this number compare to, say, a year ago. That's the third question.
Visibility is typically fairly good because, I mean, they're in a very similar type of business like our Light & Optics business. I hesitate to give you a detailed number on the inventory, really, as I don't know it, to be honest.
The question was not inventory. I think it was about order.
Was it order?
Yes. Order duration, yes. Order duration.
Order duration. Sorry, I missed my -- I misunderstood.
No worries.
No. That's very similar to our semicon business, very, very similar. Very similar business behavior and business patterns. So large household names in in the supply chain for mobile telephones, essentially. Very similar pattern for Light & Optics business, very similar pattern to the semicon industry that we have. So typically, visibility of under 4% and that's how long it typically lasts, I'd say.
How long, sorry?
A quarter or 2.
Okay. Okay. Okay. Got it. Yes. And my last question, just a little bit of a general one. We know the problems in aviation that you highlighted and on some of the legacy automotive areas as well. But just in general, how your thinking is in terms of order development going forward, what you're seeing so far in Q4 at the group level -- at the high level. And I mean, although OEMs are gradually increasing CapEx and also in legacy areas, combustion engine cars, not only in the new e-vehicles and so forth. And I just wondered, in general, how your feeling is in terms of the outlook for order development in general in Q4 and going into the new year.
Yes. I think it's going to depend quite a lot whether or not we can actually turn some of those fairly large projects in the automotive industry that we have in the pipeline into real orders because I mean, that [ makes things going ], right? I mean if you have double-digit millions in a single order, that makes a big impact. If I -- if you'd ask me more of a -- yes. Meanwhile, on the pulse here, I would say that semicon, I would expect to continue to be stable. I have no indication why it's declining, not even slowing down maybe. At some point, it will slow down, but I don't think that, that's going to happen in the very near future. I think that our Light & Optics bio business or life science and health care business, that's got to come back at some point because it's not a structural problem, but it is more like really a COVID-driven problem. Light & Safety, I don't -- I think it's fine. We do see good demand in the marketplace there, as discussed a number of times already. So no issue there. VINCORION and the automotive business in Light & Production, that's the -- those are the big question marks. And here, I would say that VINCORION defense we don't have to discuss. Stable aviation, I think aviation will be down for longer. I don't think that aviation will come back in any time soon. Automotive, I would say, is different. I think automotive, we can by now echo what many people in the industry are saying. Definitely, Asia is back or back up, at least. They're going up. That's for sure. I just would like to say come back from a business review there, but it was just virtual. But we just had our business review with our Asian organization, particularly the Chinese people, and they are reporting an increasing demand in the car industry. So Asia, going up in automotive. I think Europe where people said and folks said in summer period is stable. I was a bit more careful. But it seems to be the case, at least. If I look into the pipelines, they're growing, actually, when it comes to European focus; in particular, of course, in the laser processing and in the automation integration business. Metrology is still a bit of a question mark. And to me, the big unknown remains the North American part. Detroit, I have no idea what's going on there. We get conflicting messages. There are some customers that seem to be blind. Some of the new cars players there, new start-up players, even in Detroit, and e-mobility seems to be going good. Of course, we don't really know. So Detroit for me or the North American car industry is the big unknown. And that is, for us, about 40% of our car industry is actually exposed to North America. Well, I don't think it can go down anymore, I would say. So I think -- an easy way of answering is it's so low, the only way is up at the moment actually. Yes. And TRIOPTICS, of course, will help us. That's for sure. Hans-Dieter was just pointing out TRIOPTICS. They will certainly help us.
So they've seen a good order book development year-to-date?
Yes.
The next question comes from Peter Rothenaicher from Baader Bank.
Yes. I'm a little bit puzzled regarding your results in Light & Production. So you had in the third quarter an EBITDA margin of more than 20%. So you never had a quarter with that margin. And this -- in such an environment and with such relatively low sales volume. So I cannot expect that this is purely operational. Can you give us here some explanation what is behind it and what we can then expect going forward?
Yes. Peter, we have tried to explain it already a little bit to you. In this business, we have taken a huge counter measurement concerning the cost base. And especially, the colleagues Stefan just mentioned, our exposure in U.S. and Canada and North America. And there, the colleagues have been able to realize a 13 -- 30% EBITDA margin, even with 50% less sales, yes? They had a base 9 months with 9 months comparison half of the sales this year, but 30% EBITDA margin, even better than prior year, and they took out millions of costs, yes? And this improved, especially in Q3, the earnings very much, yes? And now as the business is coming back with orders, hopefully, if we can realize the orders, Stefan explained to you, some of them are in Americas, then they can backload the factory again, and then it will even improve, yes? So we managed -- the biggest part, we manage from the cost side, yes?
So does it mean you're expecting also for the upcoming quarters strong profitability? So even if not 20%, but then definitely, still 10%, 15% or even more?
It's difficult to say at the moment because we are, in some part of the business, in a restructuring mode. And then it's, at least in Germany, difficult to go in short-time work if you, at the same time, are talking through the unions to release people, yes? So this is -- so to speak, it's [indiscernible] where we are in. I don't know the [indiscernible]. You know what I mean? And we try our very best. But finally, short-time work, if the business in the metrology, and I'm talking mainly about metrology, like Stefan did, yes, if the business in metrology is coming so much down like it did in the first 9 months in our business, and we don't assume in the -- even in the next 5 years to be back on the same level in metrology, I'm talking about metrology, then you cannot work years with short-time work. It's a mission impossible. So we have to do -- to adapt the cost basis to the business we see in the next year. And that is the work which is in front of us. And therefore, we probably cannot work with such huge counter measurement on the cost side in Q4 like we did in Q3. And in the other businesses, in Automation & Integration and laser processing, the colleagues are already preparing the order we received in September. And hopefully, they are very positive that they can get some and earn some other orders, then they need people. You know what I mean? Then they are preparing it. That means higher inventory and start working. We will see, with some milestones, sales and EBITDA already probably. So therefore, we need the people. And -- but then we have also sales and EBITDA. So it's not a problem. But I try to explain it now to you in a more deepness that you can see how complicated it is to foresee exactly what will happen. But overall, we take this measurements very serious. And our intention is to book it in this year, yes, to realize the accruals and to book the accruals in this year, all right?
And I think -- yes. And additional, you want color on that explanation. I mean, as Hans-Dieter said, we do use short-term work or furlough schemes around the globe, and they are structured differently in different parts of the world. In Canada, it's a direct subsidy, actually. And the government actually subsidizes companies, not people. And in Germany, as you're all aware of, the subsidy is more against sort of the income of the folks, of our associates. The overall effect is the same, but there's difference in the way different countries subsidize those programs. I think that's an interesting proposition [ today ].
Okay. One small question on your balance sheet. Can you give us the exact amount of the goodwill you had in? So it's only a sum of intangible assets and goodwill, which you have mentioned.
Yes. Yes. Peter, I'll surely -- I may so, Stefan. Yes. I surely can give you a more deep insight in this. With the acquisition of TRIOPTICS, we have increased our goodwill by EUR 260 million in the first step. We acquired 75%, so EUR 260 million. And now we are at EUR 395.2 million goodwill. We have EUR 160 million at the year-end, round figures, then EUR 20 million additional for INTEROB, roughly EUR 180 million and then EUR 200 million, EUR 216 million. So we are now at EUR 395.2 million goodwill.
And one small request. So in the current interims report, you had not in the table for the quarterly results, order intake and so on. This would be very helpful, in particular, in the morning when you have to take your comment very quickly. So it would be helpful if you could put it in the next quarterly reports again.
Which figure or what piece are you missing?
Just the quarterly figures for the different segments in terms of order intake, EBITDA and so on.
Okay.
Well, we'll check and then...
Which page? Sabine is showing us that it is published on Page 2 in the quarterly report. I will check it.
Yes. But not for the segments.
No, no. Not all the segments. Just the overall, yes? We take it with us. We think about it, and yes.
The next question comes from Richard Schramm, HSBC.
Yes. Just a quick follow-up on this metrology topic because you talk a bit about restructuring needs, which then, obviously, will cause some additional costs here in Q4. But yes, maybe to be a bit provoking, but shouldn't you better think of an exit of this business? Because there are definitely tendencies that combustion engines will die. Ask [ Mr. Deese ].
I know that given the way you phrased the question, you don't actually expect an answer, I guess. We are responsible for all our businesses, all businesses that we have in the portfolio. And we always, of course, want to manage our portfolio so we can maximize shareholder value and stakeholder value as well. It's important for us as well. We're not just after shareholder value but we're also after stakeholder value. And I think maybe to say that we have maybe burned our fingers a bit lately. We have our experience with communicating that we want to sell business, which we then cannot because people are not prepared to pay the amount for it that we think reflects the value of the business. And I don't -- I have no interest in having a similar experience anyway, anytime soon, let's just say. Again, as I say, I think I understand where the question is coming from. And you know that -- and I know that you know that I never answer this question directly. But it's a fair question. And we are constantly, obviously, monitoring our portfolio. But I think at the moment, it's not something -- at this very moment, it's not something that we're actively pursuing.
And the next question comes from Craig Abbott from Kepler Cheuvreux.
Yes. Sorry. I just had 2 real quick ones again. Sorry, just getting back to the working capital intensity issue. I realize you can't give us your numbers, and we talked about the factors earlier. But in the past, you've given kind of directional indications where you wanted to go. You succeeded initially in getting it down on a full year basis in that 20%, 25% range. And now we have the structural effects. But I just wonder if you have like a broad target maybe for a full year basis, '21 basis, '21, '22, where you'd like to take that. And I'll go ahead and ask my second question, please, real quick, is just free cash flow outlook for the full year. You mentioned in the fourth quarter just some unknown because you don't know how much of receivables will completely convert to sales in that quarter and so forth. But last year, you had a very strong Q4 swing. You -- after also a fairly weak Q3. And you have, of course, the guidance for the stronger Q4 sales for this year. I mean is there any indication you can give us and kind of directional thinking on that for your free cash flow figure?
Craig, may I start with the working capital? The working capital, yes, we give you indications when I started here more than 5 years ago, and we managed it down from over 30% to clearly below 30%. But please, you see the necessary that we first come into the new businesses. We have acquired a lot of businesses recently, TRIOPTICS, with 300 -- more than EUR 300 million balance, some increase. So we have first to check the mechanism behind before we can say some reliable projections and targets for the working capital level of the group in the next 2 years or next 3 years. So we will do our homework. We will learn a lot with the colleagues, with the new colleagues, and we have to see what is the recovery coming from COVID-19 influence and from the automotive issue. We see the pressure on the payment terms from our customers, which have an impact on our working capital as well. So give us the time. It's even hard to project sales and profit for the year, so next year. For the working capital, we have on our radar screen there, that's for sure. But today, we are not able to give you an indication for our targets for the year. But we are working on it, yes? So this is -- I think it's fair enough today. And concerning the free cash flow projection for the Q4, the answer is similar because, first of all, we want to realize our profits, our sales and profit targets. We can finance. We have a strong balance sheet. We have more than EUR 80 million cash on account today, still even after the acquisition payment of EUR 225 million. So we have more than EUR 80 million on the balance sheet, earning more money, yes, just sitting there. And yes, we're balancing risks and chances. But -- and the first reaction is always to support our businesses, yes? But of course, we have to make a risk evaluation. So it's hard to predict how the free -- in this year, hard to predict how the free cash flow will develop because there are a lot of businesses which are signaling already to us that the sales will realize more in December in the second half of November, meaning, that we have turned inventory into trade receivables, but it's not positive for the free cash flow. But nevertheless, if we have a not so good development like in the last year, Q4, concerning the free cash flow, we will be happy with the free cash flow we will realize in this year because we know that it's coming back in Q1 next year, yes? So we will have then a much stronger Q1 concerning free cash flow than in this year, yes? So this is, I think, a fair answer. It is really hard to predict. But obviously and it's clear that we are aiming for black figures in the free cash flow as well for the year. That's clear, yes? But that's an indication I can give you, yes. Stefan?
All right. No, I just wanted to sort of follow up saying that at the end of the day, we manage our suppliers as well, and our customers do that with us. And it is, as Hans-Dieter said, it's very hard at the moment to predict what's happening in Q4. We have our hands full with trying to predict the sales number and the profit number. I think we're pretty good now. I think we -- actually we feel -- I shouldn't say that. But we feel comfortable with the number that we have out there when it comes to sales and profit. But things are so liquid now. It's pretty tough. And in free cash flow, I mean, of course, as Hans-Dieter said, we'll do what we can, but we will not -- we don't see a reason to jeopardize sales for cash flow.
Next question comes from Peter Rothenaicher from Baader Bank.
Yes. I have one question regarding TRIOPTICS and the consolidation. So in the past, TRIOPTICS had minority interest of around 22% to 30%. Even apart from the aspect that you have only 75% of TRIOPTICS, are these minority interest at TRIOPTICS itself are continuing to certain extent?
No. The answer is no.
At the moment, we are at 11%, yes.
11% minorities?
Yes. And the open balance sheet and the purchase price allocation calculation and so on. And then deep dive, we have done -- it's now around 11%.
Related to the earnings or to the balance sheet?
To the balance sheet. On the core...
I mean related to earnings?
No question with your...
No. It's...
I'm not so sure what we're talking here. So we consolidate TRIOPTICS 100%. Is that the question? I think that's the question, is it? So we consolidate TRIOPTICS 100% because we own 75.1% of the shares by now.
That's true. But in the published P&Ls of TRIOPTICS in former years, there were minority interest in the magnitude, I think, of 20% to 30%.
No. It's interest. They have minority shares. They had minority shares, and I think that's what -- maybe that's what's referred to.
In the results. So in the results.
Why don't we do the following? We'll go back to you and this one individually because I don't think we -- I fully understand what you're asking, Peter. But we'll come back individually. Can we do that on a one-on-one basis?
Yes. Sure. Okay.
At the moment, there seems to be no further questions.
Okay. Well, then, thank you very much for dialing in today. Look, these are difficult times. And we are -- we're in the middle of a pandemic, and it's hard for everybody to predict what the next few weeks and months will bring. We would rather want to sit here, reporting double-digit growth rates, but we can't. Reality is we do see a decline in our sales figure. And with that comes a decline, obviously, in profitability, to some extent. However, I think, overall, we're not falling off a cliff here. We're not a business that is down 40% in total in a -- at group level or anything like that. I think we're managing, as good as we can, our expenses. We're managing, as good as we can, our cash flow, our balance sheet, our liquidity positions. And we are in fairly safe -- in a fairly safe bubble, if you want, when it comes to our balance sheet items. We have no question concerning finance -- ability to finance further investments. And we're fully committed to continue to invest into our future, into our growth.We do want to follow up and follow through with our strategy, and that does include also our long-term guidance. And despite the fact that we're probably in the biggest economic crisis, as people say, since 100 years or so, we maintain and we still, I think, stand behind our long-term and strategic guidance for the year 2022. I think we will be able to reach that and maybe even overachieve that. We did say at our original guidance for this year, would there not have been a COVID-19 pandemic, we would have been at 16% already in terms of EBITDA sales. Now of course, there is a big crisis out there, but I don't think we have any reason to believe that we will not be able to achieve that in the strategic period. So with that, thank you again for your participation and looking forward to hearing more of you in maybe in individual one-on-ones. And I wish you all stay safe, friends. It's rough out there. So please stay safe and...
Healthy.
And healthy. Thank you very much.
Thank you very much. Bye-bye.