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Jenoptik AG
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Good afternoon, ladies and gentlemen, and welcome to the Jenoptik conference call regarding the preliminary results of 2017. [Operator Instructions] So let me now turn the floor over to your host, Dr. Stefan Traeger.
Thank you very much, and a warm welcome from our side here to our earnings call today. And again, let me point out that the results we're going to discuss today are preliminary and show our fiscal year 2017. With me today in the room here is Hans-Dieter Schumacher, our CFO. And we will, first of all, discuss our, again, preliminary 2017 results. We'll then dig a bit deeper into our individual segments, and we round it up with some strategic forwards and how we see our future going forward. We'll discuss our 2018 guidance, and we'll give an outlook towards 2022. And gentlemen, I think it's fair to say that 2017 has been certainly a very successful year for our company. At the beginning of the year, we did announce the acquisition of ESSA Technology in the U.K., a company that have brought interesting new technologies to us to do with back-office solutions for our Traffic Solutions business. Midyear, we've opened up a new technology campus in Detroit, Michigan, right at the heart of the U.S. automobile industry, with there now a state-of-the-art modern facility for research and development, but also for modern production technologies. The second half of the year, we did announce the acquisition of Five Lakes Automation, again, a company in Michigan, who's going to help us to develop our automobile business indeed in a, let me say, full solution provider. In summary, I think it's fair to say that our good year expresses itself in very strong financials.We managed to grow our company by a bit more than 9% in the year 2017, and we've expanded our profitability quite a bit. Our EBIT has been -- our EBIT margin has expanded by about 70 basis points. We're now showing an EBIT margin of around 10.4%, quite a bit higher than originally anticipated.With that, I would like to turn over to Hans-Dieter Schumacher, our CFO, who is going to take us through our 2017 financials for the group.
Yes. Thank you, Stefan, and a warm welcome from my side as well to all of you. On page -- Slide #4, you see our revenue in comparison to prior year, splitted out into our quarterly revenue figures. And here you will see that with our Q4 2017 on a very high level, EUR 221 million in sales, again, a very strong quarter, all quarters have been above the prior year quarters. And in total, it ended up at EUR 748 million, which is 9.2% growth compared to prior year. Taking into account that, also, in the Q4, we had a good supporting business development in Optics & Life Science as well as in Mobility segments with figures realized. Then you then go ahead with me to the next slide, you see our operating results, EBITDA and EBIT. Both earnings figures increased stronger than our revenue figure, the EBITDA by 12.8% and our EBIT even at 17.6%, with an EBITDA margin above 14% and an EBIT margin around 10.4%. We realized, again, a very, very strong profitability level taking into account that we did not have only positive impacts by the very well-developed Optics & Life Science segment with substantially higher EBIT contribution. Stefan will show it to you later on when he will lead us through the segment development. But we also had one-off expenses. As you all may remember, we are talking about it throughout the year concerning our big projects in the Mobility segment and Traffic Solutions all around Toll Collect. Then we had also, in the EBIT figures, realized some of our purchase price allocation impacts, PPA effects from the acquisitions of ESSA and Five Lakes in total roundabout EUR 2 million. In the sales figure, you have a mid-single-digit number in sales. So these are the impacts we have seen here in the group. Then you then now follow me to the next slide on Page #6.You will see our key performance indicators, who are looking more in the future, in the upcoming months and the years concerning our development. You see our order intake which has been at a little bit above EUR 800 million, EUR 803 million, which is an increase of roundabout 9%, shows you also, again, book-to-bill ratio of clearly above 1. Our order backlog increased by 12% with EUR 453 million, a solid strong basis for 2018. The frame contracts came a little bit down, as expected and communicated to all of you, because of the reclassification of some of the frame contracts due to -- to order intake and backlog due to, for example, Toll Collect, which is alone EUR 29 million. So this has an impact here.Our next slide then shows you the, on Page 7, our net debt development over the years coming from a very, very high negative situation in 2006, now even taking into account that we had roughly $10 million higher investments last year. Our dividend payment increased by roundabout EUR 2 million. We had to finance the acquisitions. In total, our net debt increased. We are now at EUR 69-plus million, meaning EUR 69 million more cash than debts, in total a very strong development. Our free cash flow just throughout the last year has been approximately EUR 72 million, which is a little bit below the prior year, as always told to you, but still taking into account what we had to finance still on a relatively high level.And then I'd like to hand over, again, to Stefan, who will lead us now through the development of our segments. Stefan?
Certainly, and thank you very much, Hans-Dieter. Let me take you, first of all, to our Optics & Life Science segment, and you see that on Page 9 of the presentation. In our Optics & Life Science segment, you've seen, again, new records in revenue and earnings, driven by a high demand for solutions in the semiconductor equipment industry, but also driven by a very positive development in our health care areas. Revenue grew from EUR 221 million to more than EUR 259 million in the past 12 months. And with that growth in revenue, we've seen a step-up in EBIT from EUR 33 million to more than EUR 50 million in 2017. The EBIT margin has been growing, of course, due to the higher volume in the segment, but also, and in particular, due to a very favorable product mix. Let me point out that we have seen and we actually continue to see pretty strong tailwind in this segment from our semicon activities. And that does look very optimistically into the year 2018, in particular, for Optics & Life Science segment. Let's have a closer look in our Mobility segment. And as you know, in the Mobility segment, we consolidate our automobile business as well as our Traffic Solutions division. Revenue in that segment also grew quite significantly by about 9% to now roughly EUR 270 million. Both segments or both divisions actually contributed to the growth in revenue as well as, of course, the additional consolidation of our acquisitions, Five Lakes and ESSA, for this particular segment. The consolidation effect here -- the nonorganic effect, if you want, is somewhat below EUR 10 million. So even organically, the sales in this segment grew significantly.We have had some positive sales effect also already from our Toll Collect project in the Traffic Solutions business in the low double digits. The priority of the sales from that Toll Collect project will come in 2018.That said, though, EBIT margins are in decline and have been declined, I should say, in this segment due to really one-off expenses, and we've discussed that in prior earnings calls in detail. We have had the expenses, in particular, around the Toll Collect project. And in addition to that, we have obviously had the PPA effects from the 2 acquisitions in this segment. So again, margins have been declined in 2017 despite the growth in revenue, and that is due to the onetime effects that we've discussed in the past already.Let's go to our Defense & Civil Systems segment. Sales in this segment are flat, and with that comes a flat development in our profitability in this segment. Sales, let's put it that way, are flat on a -- or versus a very challenging comparator. I think you might remember that in 2016, this business has invoiced several major projects. And for 2017, we're actually proud of the fact that we managed to grow slightly, essentially, a flat development despite this very challenging comparator. We currently do monitor very closely the political developments in Berlin, and we do hope for a bit of a fast decision-making process in our political environment here going forward.Talking about going forward, talking about future, let me take you somewhat on a journey and let me discuss with you our thoughts on the strategic development for the Jenoptik Group, and let me take you to Page #13.Before I talk about the future, I think it's worthwhile to at least have a very short look into the rearview mirror here. And I think it's fair to say that in the past 10 years, things haven't always been easy for Jenoptik. I guess, the company steered the ship through some choppy waters at times. The financial crisis of 2008 had to be managed. The company had to reduce debt that was at the times, I guess, limiting the ability of the company to invest into growth quite a bit. Today, the situation is quite different actually. We're now in a very strong financial position. We have a very strong balance sheet. And we have the means and, certainly, the willingness to invest into growth. And for that, we have put together a strategy that really focuses on 3 major building blocks. Our strategy going forward is going to focus on focus, focus on focus. And it's coming to focus on innovation and it's going to deal with more internationalization of our company. Before I go into more detail and try to explain that a bit more in detail, in summary, I would probably say that our strategy is going to take the Jenoptik from a rather diversified industry conglomerate towards a more focused technology group. I used the word, focus, quite a bit in the last few seconds already. Let me dwell on that a bit more and try to explain what I mean by focus and what I mean by more focus for Jenoptik. I guess, it's fair to say that the Jenoptik by today is still a pretty diverse thing. We have a broad product portfolio, and we have a very broad business portfolio. And at times, I do wonder if we can actually do everything with the same amount of intensity and quality across the whole portfolio. And as a matter of fact, I think focusing a bit more on what we're really good at is a good strategy for us going forward. And the question, what we are really good at, I -- for one thing, we can answer by mentioning photonics and optics. Optics and photonics really is at the heart of Jenoptik. It's something that we're really good at. It is if you want our core competence. Optics and photonics is not just something that we are really good at, it's actually a technology that drives a lot of change in a moment. There wouldn't be any digitization without photonics, and there wouldn't be any forced industrial revolution without photonics and optics. Without photonics, no modern life science or public safety. So photonics really is influencing more and more areas of our society. But photonics is more than that. Photonics is not just a cool and interesting technology and enabling technology, it's actually a very interesting marketplace. They're markets that grows on an average 2x the global GDP, and does -- opens up for us really an entrepreneurial potential and opportunities for future accelerated growth than the company. So going forward, you will see us intensifying our focus on our photonic core competencies and photonic technologies, and we will manage our portfolio more actively in future.With that said, I think it's fair to say that we have parts -- and you all know that. We have parts of our business that are not engaged in photonic technologies, in particular in our defense business, where we're pretty much focusing on mechatronic technologies. These businesses will be carved out and will operate under a new brand going forward. The new brand will help these businesses to better utilize their chances in the marketplace. Let me anticipate a question you might have. As of today, we have no concrete plans to sell these businesses, but we will explicitly not exclude that for the future.And then the other major building blocks are innovation and internationalization. And let me start with innovation, I think is a question, and innovation is really the fuel for our business. Innovation is very, very important in our high-tech markets, and we really intend to enhance our R&D work in stepping up our investments into innovation. We have the willingness to increase the level of R&D spend of our group to about 10% of revenue by 2022, and that includes, obviously, direct R&D spend as well as customer-focused project work. We'll not only enhance our R&D spend and stepping up our investments into more innovation. And we'll really, in particular, work on making our processes faster, making ourselves more agile. You might wonder what's that to do with innovation. I think it's quite an important factor if you want to be -- or the company one wants to be really innovative. Innovation is driven by creativity. And if we are going -- and that's what we intend to do, are going to push our decision-making process more into our operating units that will make our company faster and, again, more agile. I think the Jenoptik has a bit of a tendency to centralize decision-makings at the moment, and we will certainly change that. We believe that the decentralized decision-making processes will make us faster and will enable faster development cycles, more freedom to explore, and we'll certainly see the encouraging of the competition of ideas. In other words, creativity enabled by more local decision-making, and that will enable more innovation, which is driving growth in our businesses.The last building block I would like to talk about is internationalization or more international, as we call it. We are an international company, no doubt about that. We have, luckily, global facilities. We have offices around the globe, but I don't think we're actually a truly global enterprise in more of a cultural sense. Having offices around the globe is one thing, that's very important, and it's good to have that, but what we're aiming for is to become a truly global enterprise by also fostering an international culture in a much more diversified leadership team. So you will see us going forward having more managers with international background, intra-cultural experiences, but you will also see us focusing more than we do today in particular in Asia. We have a very good structure in the U.S. We're certainly very well established in our home turf here in Europe. But in Asia, I think we can step up our activities there. We can definitely make our business set up better over there in Asia and with particular focus on China to begin with. We intend to have local R&D teams going forward in all major markets, not just in the U.S. and in Germany or in Europe. So in particular, in Asia, we aim to have local R&D teams going forward. And we do have the willingness to have at least one of our divisions with its headquarters outside of Germany in future.So in summary, our strategy going forward calls for accelerated growth and margin expansion based on 3 major building blocks: more focus, more innovation and more international. That said, having a strategy is one thing and certainly a good thing, but deploying the strategy successfully, that really is if you want the name of the game or the goal going to deploy the strategy successfully. And what comes to mind is the good old saying, culture eats strategy for lunch. We can all write down strategies on paper until the cows come home. But if we don’t have the culture in the company to actually deploy successfully, we're not going to win. But winning is all we want and to want to have a winning culture within our company. So you will see us also focusing on cultural development and on making the -- or changing somewhat the culture in our company towards a more agile and faster environment and an even more attractive environment for associates. We will kick off a program, and that will deal with cultural change under the headlines of ‘More Light’, and we will certainly continue to report on that in future.Let me take you to Page #18. And part of a culture of a company is focus. I'm talking about that a lot. Part of a culture of a company is also the ability to prioritize. When I started at Jenoptik, I was at times a bit surprised. Whenever I asked folks for their priority lists, I got lists as long as my arm at times. So I think it will be important for us to become better in prioritizing. And obviously, as the executive board, it's our duty to walk the talk here. And we intend to do that by establishing, and then communicating priorities more clearly into the organization, but we will also intend to and we also do actually want to share that with you here on the call and with the whole stakeholder community, if you want. The priorities for us for 2018 is: a, to establish the new business structure we've talked about. And by the way, maybe it's a good idea to explain that a bit more in detail. I don't think that I've talked about that, that much in this call yet. We do intend to make our organizational structure clearer and easier. The Jenoptik is a pretty fragmented thing, shall we say. We run the -- or we report the business in 3 segments, but we're managing our business in 5 divisions, and we have lots and lots of legal entities within the company. And part of the (focus project) will be to make our business setup easier to understand. We intend to, going forward, establish 4 major divisions, and we will not talk about segments and move us to Germany for the divisions. [Foreign Language], we will not talk about segments in [Foreign Language] anymore in the future. We'll just have 4 major divisions, and we will make our -- we will consolidate the legal entity structure that we have in particular here in Jena, but also in other places. So establishing a new business structure, consolidating our businesses somewhat in 4 larger divisions is going to be a focus priority for 2018. Another priority for 2018 will be the reorganization of our business in Asia, as we've discussed earlier, and the last priority for 2018 or the third major priority for 2018 is the launch of new brand for our mechatronic businesses. We intend to establish the new business structure within 2018, and we will go live with that beginning of 2019, by the way.With that said, let me discuss our guidance for 2018. You might have seen that already. We expect revenues to be in the range between EUR 790 million and EUR 810 million this year. And we expect an EBIT margin between 10.5% and 11%, somewhat up versus prior guidance of around 10%. We do see and continue to see tailwinds, pretty strong tailwinds actually in some marketplaces, namely around semicon and the other OEM businesses. We do have certainly a strong order backlog in this year. Our order book is up 12% versus last year, the same time. On the other hand though, we see ongoing challenges in supply chain. And we monitor very closely developments in the exchange rate, and we, say, we monitor these risks very closely. Overall though, we're actually pretty optimistic for 2018. And as I said earlier, we'll see sales around EUR 800 million, somewhere between EUR 790 million and $810 million, and an EBIT margin in the corridor between 10.5% and 11%.Let me look a bit further into the future. We've discussed our strategy, and our strategy aims for accelerated gross margin expansion under the 3 major building blocks of more focus, more innovation and more international. We will see, as I said, accelerated growth. We expect our sales to grow on average in a mid- to high single digit area for the group in the next 5 years, and we intend to step up our margins and expand our margins. By 2022, we expect to achieve about 16% of EBITDA margins for the group. And let me point out, we're talking EBITDA here. We'll increasingly talk about EBITDA. We think that makes us more comparable, in particular, when we see more active portfolio management process. We've talked earlier that we do have the means and certainly the willingness to grow organically, but also by acquisitions. And more active portfolio management might also include divestments at times and where it makes sense. So therefore, we will increase our communication around EBITDA or EBITDA in future. But in summary, again, we expect revenues to grow in a mid- to high single digit range in the next 5 years on average and margins to expand to about 16% EBITDA by 2022. With that said, let me pause here. Thank you for your attention, and it's time for questions.
[Operator Instructions] And the first question comes from Craig Abbott from Kepler Cheuvreux.
I'm from Kepler Cheuvreux. Yes, I guess, I'll start with 3 questions. The first question, you mentioned, in your closing comments, one reason why you shifted the focus with regards to your midterm target EBITDA for more international comparison. But I just wondered if we should also interpret this to mean that, obviously, to achieve your accelerated growth, you have to invest more. You already mentioned you'll be increasing your D&A spend, but I would presume maybe that implies you also have a higher investment rate going forward. So I just wondered if you could give us some kind of guideline as to how we should be thinking in terms of your CapEx and D&A over the next 2 or 3 years. The second question was -- this may be a little bit premature, but I wondered if you could give us a little ballpark indication for how much of your activities are -- both sales and EBIT-wise, are currently related to your mechatronics that you're wanting to carve out. And my third question is, you mentioned you want to increase the R&D spend to around 10% by 2022. I believe that will be an almost 4 percentage point increase. I just wondered to what extent you might be able to offset these declines in SG&A cost?
Yes. Craig, thanks for your call -- thank you for calling in, first of all, and thanks for your questions. Let me start with the second one or the third one actually because I think might need to clarify that somewhat. We talked about 10% spend on innovation. That includes the R&D spend that you find in our OpEx lines, but it also includes spend that we have for new products for specific customers, which you would see in the Jenoptik. So just to give you an indication. I think the total of that spend in 2017 has been around 8.5%, 8.6%. So it's not 4% increase, but more from sort of 8.5% to 10% in that arena, okay? Secondly, on the mechatronics businesses, I think a good way to answer that question might be to discuss the parts that were actually coming out of that business. So you already know or pointed out -- pointed to DCS today is a number of businesses and mechatronics businesses as well as some photonic businesses, namely our sensor business and our joint venture with Hilti, the HILLOS GmbH. And those 2 businesses, the photonics businesses will carve out from the DCS segment and merge with our OLS, essentially our whole OEM business going forward. And the amount of business that we will carve out from the DCS segment and merge with the OLS business going forward is somewhere in the mid-double digit million range. Obviously, I can't give you any sort of specific numbers here. But if you sort of think about mid-double digit, then that's about a good number of sales that we are going to carve out from DCS and merge with OLS. And the rest will get the new name and will operate under our new brand going forward. And the last question had been around the EBITDA and investment and better comparison in D&A. So we don’t intend to give you a long-term forecast in particular on the investments and D&A. We don't guide on that for long term. But you're certainly right. If you would want to grow, then we do want to grow organically as well as via M&A activities. And we have -- as I said earlier, we have the means and certainly the willingness to continue our M&A activities. We continue to scan the market and scan the environment. And when it makes sense, we will add acquisitions to our organic growth. And in order to help us all to compare numbers going forward a bit more, we'll switch more and more to EBITDA. In particular, we don't want to have to explain all the time PPA effects and the likes that makes, I think, our lives easier, make your lives easier. But nevertheless, we will continue, of course, to report on EBIT. So it's not as if we're not going to report on EBIT, it's just one other thing that it makes our -- but also your life actually a bit easier and makes us a bit more comparable to our peers if we give our guidance going forward more on EBITDA. But again, we will continue to report on EBIT. And for this year, actually, our guidance is in EBIT and not in EBITDA.
Great. But maybe I just have some quick follow-up on that. Can we generally expect on an organic basis, excluding, obviously, any potential M&A, grow organic basis, can we generally expect that CapEx, and therefore also be aligned to be somewhat higher over the next couple of years than it has been over the last couple of years as a percent of sales?
Look, I mean, I think we'll disclose the numbers in particular when we have our audited financial results. But our investments in 2017 have been pretty substantial actually. And so we've stepped up investments in 2017 already quite a bit.
By EUR 10 million.
By EUR 10 million. Hans-Dieter just pointed out. So we certainly don't intend to reduce that.
And the next question comes from Stefan Maichl from LBBW.
Stefan Maichl from LBBW. Some questions from my side. The first one is for Mr. Schumacher. Free cash flow was ahead of your guidance, I would assume. Could you outline the main driver of this successful development in 2017? The second one, has there been any one-offs in the EBIT in Q4 we should take into account? And the third and last one, I've tried to reconcile your 2018 EBIT guidance. I mean, you've given margin range points at EUR 83 million to EUR 89 million versus EUR 78 million in 2017. And if we add around EUR 6 million, I would assume one-off back-booked in 2017. We already reached the lower end of your given guidance range. And then having in mind around EUR 50 million in sales lifts you pointed out, then assuming a stable gross margin of around 36%, I would come up to an EBIT above EUR 100 million. So if there's something I missed in the calculation, which might be against you, probably one-offs or some changes, costs linked with your structural changes. That's my question.
I think the first one, Hans-Dieter, has been around cash.
Yes, cash. Thank you, Stefan.
The easiest question.
Yes, this was the easiest question, but not the easiest job we did in the last year, especially in the Q4. We managed it very close to follow colleagues in the businesses. One big customer in one area we have talked about was supporting this development because we asked him to pay his duties, and he did it the 29th of December. So with this big payment, we ended up -- as you mentioned it a little bit, mainly, this was the effect of why we ended up a little bit above our expectations. But all in all, to be honest to you, we have pushed our teams in sales and supply chain and in R&D and operations to collect as much as possible. But you can imagine, with this high sales figure, we had a lot of trade receivables, especially in the month of December. Our sales has been very high. I can say it to you, we would probably -- probably, we'll talk about the final figure in a couple of weeks. But I can tell you it was, again, a very, very high month in December, which is only 3 weeks, yes. And this is still in our balance sheet, not in cash position and trade receivables. And we prepared, on the inventory side, our deliveries in Q1 and Q2 to Toll Collect. We will deliver our pillars to our customers. So we increased our inventory. So we had a little bit -- an increase in working capital pressure, so to speak, coming from the good businesses. So this led to -- finally to the situation that we have not the cash flow in which we realize normally in the last weeks of the year. And in addition, we spent a little bit more money in investments than in the prior year because our investments went up in total by EUR 10 million compared to prior year, and the part of it we've realized in Q4. So we had some spendings in customers and in investments. So this ended up with free cash flow we explained -- we informed you about.
On the EBIT question, look, I think we have some factors in the marketplace that make us optimistic for 2018, and we've discussed that. We have tailwind in our markets, and we have a strong order book. But we also do see potential risks in particular around our supply chain and around effects, developments. And so therefore, we -- I believe I've given the guidance that we've been comfortable with, and that is we will expand our margins again this year. We, I think, raised the guidance on EBIT margin quite a bit in the past. The company has talked about an EBIT margin of around 10%. We assume somewhere between 10.5% and 11% for now, and that's the range we feel fairly comfortable.
So would you agree with me that it's a kind of conservative guidance given FX volatility, market volatility at the beginning of the year, as usual?
Look, obviously, it's not our job to discuss whether or not our guidance is a question for conservatives. The guidance that we feel comfortable with, and we think that we will end up somewhere between 10.5% and 11% in the EBIT margin.
And a quick follow-up on free cash flow. Mr. Schumacher, could you report the working capital ratio you achieved in 2017? And would you confirm the 30% midterm target given some quarters ago?
Yes. Do you want to hear the working capital quarter right now for the last year? We will publish it in a couple of weeks from now on. Please wait until we have our final figures. We'd like to have some additional information for all of you. And I still feel good with the target of 30% working capital quarter, yes.
And last quick 2 points. The first one, again, one-offs booked -- any one-offs booked in Q4? And the second one, maybe some ballpark figure for the tax raise you might pencil in our models for 2017.
Okay. While -- we had the purchase price allocation which we finally booked because we made the last acquisition, Five Lakes Automation in August, and the main impacts we have in Q4. So in total, ESSA and Five Lakes, it's around about EUR 2 million in EBIT, EUR 2 million.
In Q4?
No, for the whole fiscal year, but the main impact has been in Q4. I think it has been EUR 1 million until end of September and an additional EUR 1 million in Q4. In total, it's a little bit more than EUR 2 million. And then we have talked throughout the year about our initial costs of our big project, and we have talked about some million impact. I'm not quite sure whether we have...
Toll Collect, yes, yes.
Yes, Toll Collect. I think that we...
I think what we did, what we can say is that our Toll Collect -- the expenses Toll Collect have been higher than originally anticipated. And we have disclosed already that the expenses or the overspend, if you want, is in the few million range. And certainly, those expenses do not roll over into 2018.
Well, has there been any additional expenses of Toll Collect in the last quarter? Because we've already booked about around EUR 5 million in the first 9 months.
We have had -- we've continued to spend, but within the planned area. And again, let me maybe specify that a bit more. The total expenses on that project are higher than the number you just mentioned. The total R&D expenses on that project are in the double digit million range, but -- low double digit. But the overspend is what we've specified in this particular instance, and that we have digested in our P&L in 2017.
Though you will make your calculation, it's a certain amount which will disappear in 2018, that's for sure. And coming to your last question, Mr. Maichl, concerning the tax rate. You can -- we feel a relatively low tax rate. Let me say it in these words because we have -- you will see one extraordinary positive impact in our earnings before taxes and earnings after taxes as well. And it's concerning the payment from takeover of a company where we had a stock of I think it has been 4%. And it has been taken over. It's an American company. I think we have already talked about it, and we will publish it anyway in our annual report. So it's a company named ATS in U.S., which is in the Traffic Solutions business, where we had a 4% stock part. And they have been taking over, and we have to realize the so-called squeeze-out. So we could not say yes or no. We got the money, so to speak. And it's a certain -- it's a relatively big amount for the 4%, and this will increase our I. So the EBT will be relatively high, and the tax rate will be influenced by realized tax assets. So the tax rate in terms of cash tax is in a normal level for us because we have carry-forward losses. But the positive aspect, the activated tax assets will take a little bit out the taxes we show, the level of tax rate a little bit -- let me say in the region of -- approximately, at the moment, we have preliminary figures, 10%, like this you can calculate.
So 10% from EBT? And could you quantify this one-off below EBIT or between -- so which amount should we assume?
We will publish it in a few weeks.
And the next question comes from Richard Schramm of HSBC.
I would like to ask something in connection with this new segmentation. So in your press release, you have outlined that you would like to follow this new segmentation in the markets and the customer groups. And you mentioned OEM industry customers and public customers, something I cannot find here in your presentation, where you've put a different focus. And this customer-oriented segmentation, wasn't that already the status quo and the reason why segmentation was changed just a couple of months ago at the beginning of last year? So what really now is here the key for this new segmentation behind the general focus of this optics and photonics you mentioned? What do you think is really the massive benefit you will get from this one?
Richard, good question. And it gives me the opportunity to explain that a bit more in detail, and we will certainly focus on that more on our -- during our Capital Markets Day in a few days. But I think a good way to explain that is in the following manner. As you know, within our OLS segment, we currently have 2 divisions, our optics division and our Healthcare and Life Science division. Those divisions, they essentially have the same business model. At the end of the day, what they're doing is they develop and produce OEM-type products for large corporate accounts. We don't have a large sales force in that division. It's essentially a key accounting sales mechanism. And so, yes, as I said earlier, it's an OEM business type. And we will merge those 2 divisions together into one entity eventually running the same business model and the same sales model. We will add to that the activities from our DCS segment to do photonics, as I said earlier our sensor business, and the OLS business essentially because, again, these are OEM-type business models where we don't have a direct sales channel to end customers. And if you are in the middle of the portfolio, in what we call today our Mobility segment, we've grouped together 2 businesses that, in reality, have little to do with each other. Our automobile business sells to industrial customers. Our Traffic Solutions business sells to governmental bodies. Accompanied with different sales mechanisms and completely different ways to market and commercialize products. And we will give these individual businesses more focus, basically running them as larger divisions. In our automobile business, where we do already have an indirect sales channel, we intend to develop that into more of a solutions provider for smart manufacturing. So whenever you think about smart manufacturing and whenever you think about automation in product environments, that is where this business is going to focus on in the future. Yes, today, that's mainly in the automobile industry, but I don't think it has to stay in that segment. You could think about small production of environments in way more than just in automobile industry. On the other hand, in our Traffic Solutions business that we also have an end customer business, by the way, we have a very strong sales -- global sales channel there, and we do have service businesses. So we can in those businesses, in our today's automobile industry, but also in our Traffic Solutions business, offer really, suited to that model, if you want, full solutions for our end customers. But again, the way to address customers in these segments is just very different. Selling to a governmental body is something completely different from selling to an industrial customer. And therefore, we believe that these businesses should be run and more focused towards their customer groups going forward. So in summary, the major advantage that we do see is we're decomplexing our structure at the end of the day. Again, we're reporting in 3 segments, but, yes, we're managing in 5 divisions. And we have lots and lots of legal entities underneath those divisions, and those legal entities will consolidate. As you will see us consolidating quite a lot of legal entities into larger, single GmbHs or legal entities, and that is going to give us more effective process landscapes and a reduced admin burden.
And the next question is Malte Schaumann from Warburg Research.
A couple of questions from my side. The first one is regarding the proposed business that should be carved out in the mid-single digits, double digit million euro amounts. How does that, in profitability terms, compare with the other business? Is the average profitability comparable to the other businesses? Or is there a significant difference?
Okay. I'll probably answer it right away. And again, just to be clear, we're talking about 2 business -- DCS today is essentially 5 business units. And the 3 will remain within that segment, will be carved out under the -- from under the name, Jenoptik, and will get a new brand name more suitable to their market environment. The business we will merge with the OEM business are our sensors business and our HILLOS business, and that is the part that has this roughly mid-double-digit sales volume. We're not disclosing profitability of individual business units, so please do understand that we will not answer the question precisely. But it's not as if these businesses -- the photonics businesses in the DCS segment are above the DCS average. On the contrary, I think the businesses in our mechatronics technology businesses within the DCS segment has a somewhat higher profitability at the moment for the DCS in summary.
Yes, okay. And then secondly, on the 2018 margin guidance, I do also think that it appears to be a bit on the conservative side. But however, do you have any -- factored in any specific one-offs apart from the currency movements and these kind of things potentially with respect to the structural changes you're trying to implement or intending to implement? So are there any specific one-offs factored into that guidance?
Okay. Again, whether conservative or aggressive, it's guidance we feel relatively comfortable with. And we do see potential tailwind, but we also do see some risks around FX. And in fact, we have not factored in any particular one-offs that we don't know yet. So therefore, we haven't factored in that. Obviously, when we do acquire businesses, we will have PPA effects and the like. But it's pretty hard to give a guidance on that, and we really don’t intend to do that. We cannot tell you, do not know when we are going to close certain deals or whatever. So therefore, it's a guidance essentially based on the business as we know it today, and we'll see how it develops going forward.
Okay, okay. And then regarding the 2022 guidance of 16% EBITDA, I mean, at the upper hand of your 2018 guidance, you said come close to somewhere around 15%. So that's the smallest percentage points more than you already have today. So what is it -- why you -- maybe even there, you remain potentially on the EBIT on the conservative side?
Well, I think, today, we've discussed that earlier today. Our EBITDA margin for 2017 is slightly above 14% in our preliminary figures. And that would -- we plan to expand that in the horizon to around 16% EBITDA. So slightly above 14% is what we have today.
Yes, true, including the 1% -- almost 1 percentage point negative one-offs for Toll Collect and other things. So if I exclude that, you have more or less close to 15% in '17 and probably will be around 15% in '18. So this is 1 percentage point above the current level.
Yes, yes. We're slightly above 14% in '17, and we'll see where we'll end up with in '18. But today, we're slightly above 14% and, again, we said around 16% for 2022.
Okay. But then let me ask differently. First, on the OpEx level. Within the next 3, 4, 5 years, what do you expect to see? I mean, I understand that you invest more in R&D, so to step up your efforts there. But then on the other side, probably, you see some operating leverage effects in SG&A. So do you think that net in 4 years, 5 year’s time that you see a better OpEx ratio in comparison to today? Or will that remain broadly stable?
No, I think it's a very good observation. We will see leverage effects from growth, obviously, in particular in our G&A. We'd exclude, yes, I think marketing expenses. We will not reduce and we shouldn't reduce. We want to invest into growth, and that is in growth via annuation, but also growth via stepped-up commercialization activities. But certainly, our admin costs will not grow as much as our sales will grow. And so therefore, you will see leverage effects in the OpEx line there. And again, I mean, you can -- we can argue whether 200 basis points expansion of EBITDA over 5 years is aggressive or not. To be honest, I think 200 basis points -- 200 bps is a pretty good expansion of profitability.
Yes. But take note the negative one-offs. I mean, the 200 basis points are long term. But however, maybe not to cushion this fall, Mr. Schumacher, do you expect a stable working capital ratio in 2018, given that you had some kind of cash coming in from receivables at the end of '17 from relative terms?
Now you know growth and project business is influencing in our working capital quarter, but I don't see a big increase in the working capital in 2018 compared to '17. It will be in the region of '17 figures in percent of the balance sheet.
The next question comes from Craig Abbott again, Kepler Cheuvreux.
Yes. I'm doing 3 follow-ups, sorry. First of all, I just want to be really clear on this. The midterm target for your revenue growth of mid- to high single digit, That is referring to organic growth only? I just want to clarify that, please. The second question is, you mentioned a couple of times just during the call when you were cautioning us a bit where you do see some risks. You mentioned effects several times, but I think you also mentioned you see some risks around the supply chain. And I just wondered if you can maybe clarify first what you mean exactly. And third one, again, I'm just trying to better understand the top line guidance for this year because if we had the sales to come in from the Toll Collect contract, which I think you indicated in past calls should be of a very solid mid-double-digit million amount, where is it in the rest of the business are you expecting sort of a flattish development, i.e., are you sort of expecting semi to simply flatten out at this very high level? Or is it more on the residual Mobility business? Because, otherwise, it seems like the guidance is -- also, the top line looks relatively conservative otherwise.
I'll address, Craig, the top line guidance first. You're right. We did say that the Toll Collect project in total will contribute a mid-single-digit sales figure to the company in total over the course of the project.
Mid-double-digit? Mid-double-digit?
Sorry, mid-double-digit. Did I say single-digit? I think no, no, mid-double-digit in total over the course of the project. And I think I indicated earlier that we have already realized some sales in 2017, low double-digit million range. And of course, some of the sales from the project, in particular when it comes to the services, are ongoing. So it's not as if the whole mid-double-digit, whatever that is, is in there for 2018. But you are right that Toll Collect will give us a sales boost in '18, in particular in our Traffic Solutions business. And on the other hand, of course, there is a running business in Traffic Solutions, where some projects are running out, and we have to find ways to compensate that. The other area of, shall we say, maybe less aggressive growth is in our defense businesses. There's one thing, government's saying we will spend more on our defense activities, but the other thing is us actually getting orders and getting export licenses. And so, therefore, I don't think that our defense business, it hasn't grown through the roof, particular in 2017, and we don't expect that to grow through the roof in 2018 either. The other question you had was around the supply chain, and here I'm referring to actually a number of factors. One is, of course, the availability of personnel. It's getting harder and harder to recruit the folks we need to actually produce our staff. And there's quite a lot of talent out there at the moment in particular in our marketplaces. And we think we are a very attractive employer. But nevertheless, it's fair to say that everyone in the industry currently struggles to get the people on board that we need in order to fulfill the demand that we have. The other areas around supply chain is actually increasing the availability of raw material. There is only a limited amount of capacity when it comes to the supply of certain materials that we all need. And it's okay, and we're doing good at the moment, but it's certainly an area we have been monitoring very closely.
Which ones? Can you give us an example, which raw materials in particular?
Look, I mean, if you think about optics, I know for some, it's just glass. But in reality, the materials that we use for our rather complex optical setups and lenses and equipments are pretty special. There are lots of different special glasses that we need. I don't want to go much too much into a technical discussion here, but starting with just ordinary Pyrex glass, some silicates, some fluorides. So specific glass material is getting, yes, under quite some heavy demand at the moment because that's material that goes into -- in particular for the semiconductor industry. We've seen lots of pushing at the moment. And -- but it's also getting -- it's quite funny, we all experience that probably when we're building houses or whatever, it's getting harder and harder to get sometimes even just ordinary mechanics work to get in time and in quality that we need. We have a very high-quality demand. And so our supply also in mechanics, in steel and all of that is under heavy demand at the moment. Again, nothing to worry about. Like short term, I think we're doing okay, but it's certainly something that we're managing and monitoring very closely. I think your last question has been around the FX effect?
No, no. My last question was about the organic growth, was just to confirm that your sales CAGR target for the midterm was only referring to organic growth. Correct?
No, no, no. It's supposed to be the total growth of the company, organic and inorganic, but let me point out that I talked about active portfolio management quite a bit. And again, active portfolio management means, to me at least, acquisitions where it makes sense, but it also could include divestments in areas that we're not necessarily the best owner. Now I don't want to go into any more specifics here, but I think we've dwelled in some points. But we will certainly focus on -- or intensify our focus on our photonics core competencies going forward. And yes, I think that's where I would like to leave it at this point.
At the moment, we don't have any further questions. [Operator Instructions] Yes, and the next question comes from Peter Rothenaicher from Baader Bank.
One question regarding prospects for your traffic safety business. You now had -- the Toll Collect, you had some time ago, so big orders for traffic service providing. What do you see in terms of the pipeline? Is the business progressing well? And do you expect here for 2018 for the quick project pipeline? And second question, it was already somewhat in discussion, but your implementation of the new structure, don't you expect here major one-offs for the implementation is just more or less cost-neutral?
Peter, I think you imagine -- hello from our side here, and thanks for your questions. On the Traffic Solutions side, you've pointed out correctly that we don't just have our Toll Collect business, we have an ongoing, yes, traffic safety business. And you did point out that we had some major contracts, one in the past, which need to be replaced. By me saying that, I do indicate we have a pipeline there, but we haven't necessarily won all these projects yet. So the underlying business is, shall we say, helped by the additional sales that we get for the toll business in 2018. On the new structure, I don't think we will see a lot of one-offs in terms of restructuring. We will see some though in terms of consolidating GmbHs. Now I don't think that these will be big restructuring costs in the sense of we don't plan any sort of, I don't know, mass layups or anything like that. On the contrary, as we have no such plan at all. But of course, when one consolidates companies and restructures in order to prepare ourselves and make ourselves even better prepared for future challenges and future growth, then there might be the odd one-off costs here or there. Again, do not -- we do not intend to or plan any kind of like massive restructuring here, but you are right there could be some one-off costs in relation to the restructuring of -- in particular of our legal entities and the merger of a lot of individual legal entities.
Okay. And your guidance you've given for 2022 was the 16% EBITDA margin. Is it perhaps a right interpretation that you're currently experiencing an extremely favorable environment, particularly from the semiconductor industry? And everybody knows that here the margins are extremely high, and that this development will not continue forever, and this might have some, perhaps, in future year, also some negative impact as well?
A lovely question. Thanks for that question. And essentially, you've given the answer already. No, I mean, you've been spot on. That's absolutely exactly why.
The next question comes from Stefan Maichl again from LBBW.
One follow-up. Have you had any major audit sort of frame contracts in the last quarter in Q4?
Yes, in the Healthcare.
We have one in the Healthcare business, but it's not a major -- and so you cluster that as a major...
Above EUR 10 million or...
A million, but some EUR 10 million. We did get an order from our partners at Toll Collect actually for our services business, but that's not in the frame, I believe. That's not in the frame business. So we have -- in the past quarter, we've got an order in our Healthcare and Life Science business, but not double digit.
Well, between EUR 5 million and EUR 10 million? Or...
Yes.
Okay. EUR 5 million to EUR 10 million, okay?
Yes, yes.
And we're talking specifically Q4.
Dr. Traeger, we don't have any further questions.
Okay. Well, then thanks very much for your participation and for your interesting questions and the discussion that we had. Again, let me summarize 2017 has been a solid year for Jenoptik. We're pleased with the development, given the factors that we've discussed. We look with quite an optimism into 2018, and we believe that the strategy that we've discussed will enable us to accelerate our growth, will enable us to further expand our margins. And in particular, as I said earlier, we believe that it will help us and support in developing Jenoptik from a relatively diversified conglomerate into a quite a bit more focused technology group. That is essentially the strategy that we have. And we believe it's good for our company, it's good for us, and I believe will see us expanding margins and accelerating growth. Thanks very much.