Hello, everyone, and welcome for the first time from my end, and thank you for joining us to review our annual results 2019. With me today are Dietmar Siemssen, our CEO, and Dr. Bernd Metzner, our CFO. As we did in the past, we are presenting a set of slides that accompany our remarks on this conference call. The annual report, slide presentation, and the press release are posted on the investor relations page of our website. Please note that this call is being webcast live and will be archived on our website. Before we start, I would like to remind you that the presentations and discussions are conducted subject to the disclaimer. We will not read the disclaimer but propose we take it as read into the record for the purpose of this conference call.
Our agenda for today starts with a presentation by Dietmar Siemssen and Dr. Bernd Metzner. After that, we will enter into a Q&A session. Now it is my pleasure to turn the call over to Dietmar.
Good afternoon and also, of course, good morning to those joining us from the U.S., and welcome from my side also to our fiscal year 2019 results conference call. What happened in 2019, which was a pretty exciting year. In 2019, we laid the foundation to make our Gerresheimer fit for the future, and we started a clear growth path. We worked on the topics of innovation, excellence, customer and employee focus, and we will continue doing so. We invested a record amount into growth capacities, optimization of processes, and also digitalization. Our clear target, profitable and sustainable growth. For our future growth, we focus on new segments like full solutions for biotech drugs, innovation as mentioned a couple of times, and sales growth in fast-growing markets. A quick look at the main KPIs for 2019. We have reached our guidance.
Underlying sales was around EUR 1.4 billion, underlying EBITDA EUR 293 million. In 2019, we have invested 12% of sales into innovation, optimal processes, the digitalization, quality, capacity and growth. We will propose another year of dividend increase from EUR 1.15 to EUR 1.20. One remark, the change in the strategy of our customer, Sanofi, affected us as they canceled the development project for the diabetes micro pump. The result is a one-off effect with some implication on our numbers. Bernd will later elaborate that in more detail. Independent from the pure financial figures, overall, you clearly see that the company is changing and started to change. In 2019, there has been a tremendous level of positive dynamic in the whole company. The shift towards what I call a growth mindset is more and more obvious.
A lot of initiatives have been launched, and we will see more of that. This makes us very optimistic about the future development. Going forward, and you hear this again and again from my side, we go for a stable, profitable growth. I will show you how we reach it in the following charts. We see in principle three key enablers for our growth story. The cultural mindset for growth and excellence, the investments, and of course, innovation. As well as three big growth levers. The first one being the market dynamics or market growth, but also the growth in so-called growth segments and of course, new products. In the following slides, I will elaborate on these enablers and levers. Picking the first one, the implementation of a mindset for growth. The mindset for growth and excellence is very important.
Only with the right mindset, we change our company into what we call innovative, excellent, and customer-focused with profitable growth. Within the implementation of this mindset, we focus on six key areas. Customer orientation. Customer excellence is the target. In order to get there, we will continuously optimize all customer touchpoints, enhance our services, regulatory and quality support, strengthen our customer field engineer teams, and launch more and more initiatives in that direction. We are strengthening our global key account management and leveraging our broad product portfolio and increase sales with our existing customers. A key cultural change is really the act as one customer. We are tearing the silo walls down. All business units are joining forces to offer a broader and better service and an enhanced portfolio of products and solutions. Cross-divisional and cross BU thinking is opening new opportunities.
Management board and senior managers from all areas met on a regular basis defining joint activities. You can already see a lot of energy, cross-divisional thinking, and projects which will drive future growth and change in our company. Excellence in all that we do. The better is in the end, the enemy of the good. Excellence in all aspects of our business is the goal. Lukas Burkhardt has launched great projects for operational excellence in the glass division, which shown good progress already today and are one of the reasons why we show better and better figures in the glass sector. It's very promising going forward. The same applies for Plastics & D evices. From small batch production to high volume lines, process innovations are driving our excellence. Digitalization is actually another key enabler for our excellence improvements.
Driving digitalization will be a focus in the future across all divisions and all business units. Quite relevant, the optimal resource allocations. You all saw investment is crucial to foster our growth. Every euro spent shall result in maximized impact and contribution. We see that the CapEx spend currently is very high. A strategic program was started in 2019 with a clear target to drive the company towards higher efficiency in CapEx spend and a stronger translation of this CapEx into real growth. Next topic, quality. Quality is a key enabler for our customer satisfaction. We have a very broad production footprint globally and are able to offer our broad product portfolio to our customers in all regions. With our worldwide identical quality standards and processes, we are able to serve our global customers with the same high level of quality, independent from the region or the delivering plant.
Last point of the six is the performance culture in our company. We are changing the mindset towards what I call commitment and delivery. Performance is key in all we do. Changing this mindset or changing the mindset and culture of a company is still not easy. It does not come overnight. The successful implementation is key for our very ambitious plans for the future. Looking at the second enabler is the investments for future growth. You saw it in 2019 and also in 2020, we are executing large investment programs. We are spending around 12% of our sales on CapEx in 2019, and you will see the same in 2020. We have invested in growth and innovation projects into improving our processes, digitalization, and very important, more capacity. By doing so, we are becoming stronger, more agile, and absolutely more competitive.
With this, we are setting the pace for our future growth. A few examples. The new furnace with extended capacity in Essen and Lohr, additional lines for ready-to-fill syringes in Bünde, or the extension of the Horšovský Týn plant in Czech Republic. The aim for the future is to come back to the proven historic formula, which actually Gerresheimer lost in the last five years for our capital expenditure. The simple formula is around 4% of CapEx is needed for maintenance and other basic business. Any additional percentage point of CapEx should translate one-on-one into sales growth. We will see this again from 2021 on. Innovation will be another essential driver to materialize our growth. New and innovative products and solutions are key to attract new customers, get a higher share of wallet, and accelerate growth. We are pushing a culture of innovations throughout the whole company.
One of the activities to drive innovation is to leverage the innovation power of all our newly acquired Sensile. In cross-divisional teams, we stimulate innovation and drive projects in all areas of our business. Another great step forward in this regard is the bundling of all our glass expertise in the new Glass and Innovation Technology Center in Vineland, U.S. Innovation is not only future. Two examples of innovation which are ready for commercial launch are the following. We are moving up the value chain by introducing our ready-to-fill vials, which are great solutions for immediate filling at customer filling lines. We enhance our value chain by washing, sterilizing, and packing the vials ready for filling. We offer our ready-to-fill vials in various packaging solution in both Europe and also North America. The other example is our new product, Elite glass. Elite glass is ready for commercial delivery.
First orders are successfully in our books. The new Elite glass is superior glass quality in several aspects and significantly reduces the customer total cost of ownership. These are just two examples. The innovation pipeline, of course, is filled much better than this. Next topic. We are leveraging the technology of Sensile Medical. With Sensile Medical, we have bought an excellent technology, and we have a clear roadmap. The SQ Innovation project on heart failure is progressing as planned. The design has been finalized end of 2019. SQ Innovation is progressing well towards their launch target. This project in the therapy field of heart failure has definitely the potential for a real game changer, not only for SQ Innovation, but especially also for Gerresheimer. A micropump solution for Parkinson's disease treatment has been launched commercially and is running well.
In addition to these two projects, we have a promising pipeline. We are working with several customers on feasibility studies for future application in several and different therapy areas. We merge our innovation and product expertise of Sensile with the industrialization expertise of medical systems. A strong combination in the end, where we simultaneously engineer, develop new product and process solution, create IP, and transform the company into a full solution provider. In 2019 and 2020, we further optimized our global footprint. A few example. South America is an attractive and large market we want to grow with our pharmaceutical plastic package and portfolio. Therefore enhance production facilities in Anápolis, Brazil. The plant that we set up in 2019 is filled as we talk with machines, I'm optimistic that we will start production in summer this year. India is another large market and a large country.
Following the success of our plastic packaging business out of Kundli, near New Delhi, we increase our footprint by building a second facility to better provide the large country with our products. In China, we fill another white spot of plastic packaging. We have signed first commercial customer contracts for this business and have recently opened our new production plant in Changzhou, China. A breakthrough for expanding our plastic packaging footprint in the U.S. is in the U.S. The first local business wins are in the books, and we are now leveraging on our strong presence of center in Berlin, Ohio, where we start commercial production of plastic packaging in a close by new facility in 2020. A major add-on for capacity, you will also see in our new facility in Skopje, North Macedonia.
We have a plan to produce medical plastic systems in the second half of 2020 and also later prefilled syringes. By the way, last night I received the first picture of the first part produced on the machines in the facility. We are fully on plan, on track with our project plan. Biotech is a very promising and fast-growing market. The majority of the new formulations are actually biologic. These are typically parenteral drugs and need very specialized primary packaging and drug delivery solutions. The launch of our new unit, Gx Biological Solutions, aim to serve the customer's needs in these important segments. We bundle our cross-divisional experts, expertise, service, and product portfolio into an organization with a sole focus on this customer group.
We have actually the broadest portfolio of primary packaging and drug delivery devices in the whole industry, which can be adapted and customized to the special needs of the new biotech market. Our ability to offer a broad range of services, especially for smaller and mid-sized biotech companies, enables them to focus on their core competence, the development of drugs. We offer services for product requirements for each clinical stage, product specifications, regulatory and qualification support, lab service, all bundled in this new team, which has access to the whole Gerresheimer expertise worldwide. On the next chart, we talk about new products as growth drivers. Our innovation pipeline. We expect a significant share of growth by new and innovative products, innovative services, and value-adding solutions. Some of these new products are evolutions of existing products, but others are real game changers and are completely new. As explained earlier, we will expand our innovative approach by doing so, we expect to see more more of these new products being launched in the future.
We come to the guidance. Our sales outlook of mid-single-digit is fueled by our growth drivers. The overview demonstrates the individual impact of these levers. The foundation of our growth story for the coming years is driven by the interaction of the mentioned enablers and growth levers. How do we see the impact of these levers in 2020? We expect around 1.5% growth by the underlying market, supported by the underlying market growth, as estimated by IQVIA. Another 2.5% by utilizing our growth segments and another percentage point by new products. This, in the end, results in our guidance of mid-single-digit growth. With this, I hand over to Bernd, who will give us more insight in the numbers in detail.
Thank you.
Bernd, it's on you. You have to almost text manner.
Many thanks, Dietmar, and welcome from my end as well. Dietmar gave already the big picture for the financials. With our underlying performance in Q4, we achieved our full year 2019 guidance. Not part of the underlying performance are three extraordinary effects around Sensile in 2019. These effects have to be put into a broader context. They do not affect our underlying business. They do not affect our free cash flow. The net income impact is negligible. Better even, slightly positive. To explain these three extraordinary effects in detail. Extraordinary effect, the effect from the cancellation of the project by Sanofi. The cancellation led to a contract modification to a cumulative adjustment of revenues in the amount of EUR 17 million. The EUR 17 million are revenues linked to the exclusivity commitment, which were recognized prior Q4 2019.
Without this exclusivity commitment, we are now free to sell our developed pump in the therapeutic field of diabetes to other customers. In addition, the adjusted EBITDA was also reduced by EUR 9 million due to the contract cancellation by Sanofi. On the back of our development activities, we see in this regard basically an existing claim against Sanofi-Verily. However, we also noticed an increased uncertainty in respect to the enforceability of this claim. Second extraordinary effect, the effects from the derecognition of contingent purchase price components. We had a positive extraordinary impact from Sensile. We recorded other operating income of EUR 130 million in the financial year 2019 due to the derecognition of contingent purchase price components from the acquisition of Sensile Medical. Thereof, EUR 11 million were derecognized in Q4 2019 due to the cancellation of the diabetes project by Sanofi.
For Q4, the net impact on adjusted EBITDA was EUR 15 million due to the cancellation of the diabetes project. If you sum it up, we paid finally EUR 218 million for Sensile Medical and hence EUR 130 million less than what we expected at the time of the acquisition. With this in mind, it shouldn't come as a surprise that Sensile's carrying amount exceeds the recoverable amount and hence, as a third extraordinary effect, we recognized impairment losses of EUR 117 million in Q4 2019. Quite interesting and worth noting, combining all three extraordinary effects after tax, the net income impact is overall with EUR 5 million still slightly positive in 2019. This slide compares the underlying performance of our business on a quarterly basis. Having presented the extraordinary effects of Sanofi before, I will now focus on the underlying performance in Q4 2019 in comparison to Q4 2018.
On the left-hand side, you find the Q4 2019 performance both at constant exchange rates and on a reported basis. Adjusted for extraordinary effects occurred during the reporting period, you end up with the underlying performance in Q4 2019. The same method applies for the prior year quarter, respectively. You will find a detailed presentation on the composition of the adjustments for both periods in the appendix of this presentation. This gives you a very transparent way to look at our business. Let me highlight the following points for you. As already discussed, revenues in Q4 2019 were negatively impacted by EUR 17 million due to the project cancellation by Sanofi. To get to the underlying revenues for Q4 2019, we had to add them back to the actual numbers. The same method applies to the adjusted EBITDA. What are the key takeaways for our underlying performance?
Our underlying FX-neutral revenues declined by 2.3%. This decrease is mainly caused from lower revenues from Sensile by EUR 6 million versus Q4 2018. Our core business, that means Plastics & D evices and Primary Packaging Glass combined, remained, as already guided and expected, almost flat in Q4 2019. Our underlying FX-neutral adjusted EBITDA declined by EUR 5 million, which is driven by the Advanced Technology division with minus EUR 6 million versus Q4 2018. Our core business with + EUR 2 million could not compensate for this fully. Let me now dig into the details by division. Plastic & Devices . In Plastics & D evices, the underlying revenues at constant exchange rates declined from EUR 225 million in Q4 2018 by 4.5% to EUR 215 million in Q4 2019. This decrease of EUR 10 million is linked to lower tooling revenues.
For full year 2019, revenues within our tooling business amounted to EUR 61 million, almost at par with the prior year. As you already know, it is normal that there are intra-year fluctuations within the tooling business. In Q4 2019, we recognized tooling revenues of EUR 21 million, which were EUR 10 million less than in Q4 2018. For the financial year, the division Plastics & Devices achieved a 1% organic growth for the full year. Good news. Given the lower tooling revenues, we had a favorable product mix effect, which increased our adjusted EBITDA margin from 31.2% to 32.2%. To say it differently, the lower revenues had practically no meaningful implications on the adjusted EBITDA, which was with EUR 69 million, almost flattish compared to EUR 70 million in Q4 2018. Let's go to Primary Packaging Glass.
Primary Packaging Glass showed a strong growth and increased from EUR 158 million in Q4 2018 by 4.7% to EUR 166 million in Q4 2019. The reason for this stellar growth are twofold. The cosmetics business continued its strong demand seen in the prior quarters. Additionally, tubular glass in the U.S. and Europe increased significantly. The adjusted EBITDA grew from EUR 31 million by 10.9% to EUR 35 million. The adjusted EBITDA margin increased from 19.8% by 120 basis points to 21%. This improvement has to be seen in light of a favorable product mix and our efficiency initiatives, like the reduction of cost of non-quality. Let's go to Advanced Technologies division. The Advanced Technologies division is our innovation driver and longer-term investment case. We invest in this division and will see the return in later years.
In this respect, Q4 2019 shows EUR 4 million underlying FX neutral revenues and corresponding - EUR 1 million underlying FX neutral adjusted EBITDA. We are planning to break even in 2021 with meaningful revenues latest in the financial year 2022, 2023. You can expect a similar financial pattern within this division in the following quarters of 2020. Let's go to the strong cash flow in Q4. We had a remarkable strong cash flow appearance in Q4 2019, probably the strongest ever in the history of our company. We were able to almost double the quarterly cash flow from EUR 36 million in Q4 2018 to EUR 62 million in Q4 2019. The key reason for this achievement was our net working capital management. Our leverage decreased from 3.1 in 2018 to 2.4 at the end of 2019.
This development is surely influenced by the derecognition of contingent purchase price components, which were mentioned before. Looking at 2020, we will refinance the promissory loan in the amount of EUR 190 million due in November 2020. I am confident that we will be able to participate from the actual beneficial market conditions and lower our financing costs slightly further. Let's look at the full year 2019 underlying performance. The analysis of the underlying performance follows the same concept discussed on the earlier slides. We look through the extraordinary effects in 2019 and 2018 to get a comparable picture. With rounded EUR 1.40 billion underlying revenues, we achieved the lower end of our revenue guidance of FX neutral revenues between EUR 1.40 billion-EUR 1.45 billion. The underlying FX neutral adjusted EBITDA amounts to EUR 293 million and is also in line with our guidance of EUR 295 million, ±EUR 5 million.
We do not guide for our net income. Supported also by lower net finance expenses. We realized a very good underlying net income growth by 8% from EUR 119 million to EUR 128 million in 2019. Let's go to the accounting standard implementation of IFRS 16. The new leasing standard, IFRS 16, is applicable for Gerresheimer for the financial year 2020 going forward. Gerresheimer has opted for the modified retrospective first-time application. That means that the financial year 2020 will be presented according to the new set of rules according to IFRS 16, and the comparative prior year period will be presented with the old set of rules according to IAS 17, like the other companies do this as well. The overall impact is somehow negligible on our operations overall.
Adjusted EBITDA will be positively affected in a range of EUR 9 million-EUR 11 million from the transition to IFRS 16. Additionally, the balance sheet total as well as the net financial debt will increase in a range of EUR 27 million-EUR 30 million. Allow me a final remark. We know that this was, given the Sensile adjustments, a quite challenging quarter to grasp the underlying performance. For the future, we will reduce our adjustments significantly going forward. First, we will not adjust our underlying performance in 2019 for the 2020 guidance jump-off point. Second, we will apply a new comprehensive exceptional guideline and eliminate the old ones, which led to various adjustments in the end. I'm convinced this will support our transparency and allow us to focus more on the underlying performance going forward. Now I'm handing back to Dietmar.
Yeah. Thank you, Bernd. With this, I come finally to the guidance. What do we expect for 2020? We expect 2020 to be the first year where our positive activities translate into financial results and Gerresheimer is back on a growth path. For 2020 and also midterm, we expect sales growth in mid-single- digit percentage. We expect the EBITDA margin to be at the level of 21% in 2020, steadily improving towards 23% over the planning period. 2020, CapEx is planned to be around 12% another time and should be between 8% and 10% on the midterm. Don't forget the formula I mentioned in my earlier presentation. Today, being already mid-February, we expect our new growth strategy showing impact and being visible in our Q2 2020 numbers with further progress in Q3 and also in Q4 2020.
To sum it up, 2019, and a very intense and dynamic year, we laid the foundation for profitable growth and switched gears. We significantly improved culture and dynamic in the company. We invest and work on our innovative and innovation pipeline. We expect 2020 to be the turning point for our growth. We will grow mid-single- digit, leveraging growth segments and pushing new products. Our activities will make a difference and successfully bring our Gerresheimer onto a sustainable growth path. In order to also improve the work with you, our investors, the communication dialogue, we are planning a Capital Markets Day end of 2020. By then, we will also have a better picture of the developments of 2020, and we can give you further insights in our growth strategy. With this, I'm at the end of my presentation, and I'm handing back to the operator for your questions.
Thank you.
We've received a first question from Veronika Dubajova, Goldman Sachs. Your line is now open. Please go ahead.
Good afternoon, gentlemen, and thank you for taking my questions. I will keep it to two big picture, please, and one financial, if that's all right. I want to start big picture. If I look at Gerresheimer, your predecessors have often promised growth acceleration, and it sort of never materialized for a variety of reasons. Dietmar, can you maybe give us a little bit of insight into what gives you the confidence that this time around, as we move through the year, you will indeed see the growth accelerate? Is it contracts you've already signed? How much visibility do you have on that growth acceleration pathway, and how confident are you in that? That would be my first question. My second question is on the medium-term margin guidance.
It would be great to get a little bit of insight from you on the cadence of the improvement, especially as it relates to the core business, so excluding advanced technologies. What is the margin potential? How should we be thinking about that? Maybe if you give an update related to that on the ongoing restructuring. I noticed you took some personnel reduction costs in the quarter. Maybe you can talk about the savings opportunity that you see in PPG. My final quick financial question is just the net working capital movements. Good to see some progress. Maybe tell us, can we see more as we move into 2020? I also noticed there was some discussion of factoring when it comes to receivables in the annual report.
Maybe if you can help us understand how helpful or meaningful that was in the context of a net working capital move. Thank you.
Yeah, I actually like the first question, because this is the question of what I called commitment and delivery. That's something the company, Gerresheimer, definitely has to learn. If I go to the market and I tell you, "Guys, I want to grow 5%," nobody believes me, which is a mess. How do I see the year 2020? Let me start differently. I am completely convinced about the midterm growth that will come. Let's talk about 2020. 2020, the first quarter will start, compared to 2019, where we were relatively strong, relatively flat. That's what we see already. In the second quarter, we clearly see the growth to come. In the end, why is it coming and why are we more confident in this growth? As we see this, I come back to one of the charts we showed in the presentation.
There is, call it tailwind out of the market that is growing, and we will grow with the market. The next aspect, which is around 2.5% of the growth, which we see 2.5% growth this year, is really coming out of the materializing of the growth in key markets where we are today with products. That's, I can give you example. That is the inhaler in Oslo, Skjetten. That's additional syringes. That's glass that is coming actually out of the additional capacity that we, on the one side, generated in Essen. On the other side, you also see, for example, from the cosmetic business. The next point where we spoke about roughly 1% of growth that we expect out of new products, it's also not hope and pray. It's really things we have in the books. I bring back the examples of the Elite glass.
We have the first contracts here. We clearly have new plastic packaging products that we are selling in South America, for example. Not to forget, the ready-to-fill vials where we had not only contracts in the books, but we really start to deliver with the second quarter, and that gives us a certain evidence in this regard. For the medium term margin guidance, Bernd might also later elaborate on this or answer this. The most difficult thing is actually to turn the company into growth at all, coming off a period of almost five years of very little growth. Once this is done, you will also see the growth coming. What is important, if you remember the guidance that we gave in beginning of 2019. We spoke about this 4%-7% of organic growth. We have slightly changed the terming, but not the terms.
Mid-single- digit. What we do, and that's in principle better than what we had before, take all the Sensile business aside, we will be able to show you solid growth and fulfill this guidance with our core business. You will see the growth coming out of the glass, you will see the growth coming out of plastic, and you will see the growth out of the devices. You then, in the later years, really, we see this digging in of the Sensile business. This will come on top, and that is something which is very good. There was a slight question regarding the restructuring in the glass business. I wouldn't call it restructuring. There's no doubt we are investing a lot into the improvement of our processes. Yes, it was necessary to improve the process in our plans.
With the investments in both taking 2019 and 2020, we will bring our facilities here back on track, what I call being able to supply and to offer very competitive. Honestly spoken, if you look into the results of the glass business that we deliver now in the last quarter already in 2019, and you see this in first and second quarter, you can already see these improvements. The next thing is the net working capital improvement, Bernd, that's definitely a question for you.
Before jumping into the network and capital improvement, just to step regarding into the margin guidance, to step into this, because it is really good. It gives us the occasion also to differentiate in our guidance statement, because in the end, we have also in the next year, without the support of IFRS 16, we have basically in our core business a margin of 21%. This without any IFRS support, we expect in the core business to grow into this and increase our margin to 23%. That is something what is really important. Finally, what you will see in 2020 is that we use the support of IFRS 16, these are EUR 10 million, to fund in the end, at least, let us say, technically, our operations in Sensile.
Our core business is very strong also in 2020, and will improve some margin going forward. Where is this profitability increase is coming from? In the end, what Dietmar said, it's finally, it's a growth, because you'll see economies of scale at its best in this respect. The second piece is, we have a higher drop rate for the additional volume, economies of scale. On the other side, you have definitely efficiency gains, mentioned also by Dietmar before. Optimization, digitalization, reduction of cost of non-quality and so on. These are the drivers, actually the key drivers, where we will get our improvements of the margin going forward. Coming to your last question regarding net working capital. The net working capital was influenced in Q4 by EUR 10 million, actually.
Even if you take this EUR 10 million out, it was a very strong cash flow performance in Q4. Why we are doing this kind of factoring, the reason is that in the end, here and there, our customers want to have different payment terms. Basically, that they want to pay us later, but offer in the same time also some factoring in the end, which is very cheap. Cheaper than our own financing. Finally, we really have also some gains out of this kind of concept because the financing there is cheaper than our financing with our own banking funding. That's how you have to see Q4 2019, so EUR 10 million factoring. On the other side, going forward, for 2020, we expect over the year, very balanced 16% net working capital performance, what we have always guided also in the past.
This is something what we are striving for, also for 2021.
Fantastic. Thank you both for answering my questions.
The next question is from Scott Bardo at Berenberg. Your line is now open. Please go ahead.
Yeah. Thanks very much for taking my questions. The first one is a relatively small picture one just on why you're anticipating relatively flattish development in the first quarter. I don't think it was a tremendously demanding growth quarter for Gerresheimer, albeit arguably not too bad in the context of the full year. Is there any impact from external macroeconomic impacts or is this more relates to the phasing of your orders and your launch flow? The second question, please. I wonder if you could explain in a little bit more detail, how the business model and consolidation of Sensile or your advanced technologies is now taking place within the company. Obviously, we've gone from a period of having some revenues and a little bit of positive EBITDA to now being quite a negative, both this year and presumably a negative or so the year after.
What is it that is different here? Is it bloated operational costs or have you decided to change the model slightly? Would like you to further extend upon your initial comments, please, as to how this technology is being developed for other customers. Are you optimistic that you could strike something more significant over the near term? I'll leave it there for a second and then have a follow-up. Thank you.
Yeah, it's good to be the CEO. You always are the first to take the questions. Yeah. I go for the first one. I think the answer is even more simple than you anticipate. Again, the core business is actually developing reasonable also in the first quarter. We have some delay in one of the development contracts we expected for Sensile. This will lead to the relatively flattish picture. Also 2019, don't forget, we were not bad in the first quarter, and that gives a challenging starting point. No, the base business you will see developing nicely in first quarter as well. Second, how is the Sensile business model developing? I think this is key.
What we did, and this is one of the reasons why you see some cost that we in the former times showed as sales in Sensile are now in cost. It's because we are kind of changing the business model in a certain way because in the past, we had development contracts with the customers, and we developed, and they paid for the development. This is something we are clearly changing because we want to develop into our IP. We kind of have the costs of the development cast as R&D costs that are, of course, a cost burden, but in the end, we should not forget, we are transforming the company into a company where you are selling not only a product that you produce, but also very clearly IP and so on that gives you more business models.
Don't know whether you want to add something to this, Bernd.
No, Scott, it's quite regarding the question for Sensile. In the end, as a company, we're investing, if you look at it, EUR 5 million around in R&D in 2019. I think we have some bigger room, and we should also use the opportunity which we have now with Sensile to expand it somehow and to see this negative EBITDA of EUR 10 million as really expenses into innovation, if you want so. This gives us the opportunity to get a higher share of the cake from the product if you have really this on the market. That means that you have a higher transaction value and you have for yourself. That's a little bit the principle of how we are approaching Sensile and differently like we have done it in the past. You ask also for the other customers.
It was quite interesting that after we have successfully launched EVER Pharma, our project for Parkinson's, that we get a regulatory approval last year, you know it. We get a lot of interest from other blue-chip companies, pharma companies, which are really interested now in our pump. This makes me very confident and somehow out of this kind of leads, you will really get some tangible result out of this leads. We have also very concrete project at hand. I don't know, Dietmar, whether you want to talk about it, yeah?
Yeah, definitely. It's a risky question because the risk is that I talk for an hour around this point. Yeah, the technology. Let me say it different. We took the hit with Sanofi this year. In the very early 2019, we took the hit with sc Pharma, which in the end turned out to be a big win because with the loss of the exclusivity, we were successfully able to win the business with SQ Innovation, which is the significantly better and state-of-the-art pump. The Sanofi was an hit. You can't talk it beautiful. In the end, it doesn't change the attractiveness of the technology that we actually acquired. The only negative thing with the technology is actually that it takes so long that we see the sales and the profits, because it all takes quite some time.
We are working, as Bernd said, with various customers in various therapy fields, clearly confirming how broad the ability of this pump actually is. I am relatively optimistic that we will show first, at least development contract wins within 2020. I'm still fascinated about the technology because it opens the door for our Gerresheimer towards what I call intelligent and smart devices. We will utilize this technology, the communication tools and so on, clearly even beyond the pump in the next years. It is in a certain way, a clear changer for Gerresheimer, even though we have to wait some time, and we have to be patient before we really see the results.
That's why it is so important that what we are doing at the moment, focusing on the core business as well, showing the result of the next years and delivering the results and growth of the next years with the core business alone.
Okay, very good. It's certainly appreciated that you give a guidance which more reflects your base business progression than leaving, if you like, this Sensile as medium-term optionality. I think that makes a lot of sense. Question just from me then, please, just sort of related to this topic. You highlight around EUR 10 million or so IFRS 16 benefit to EBITDA in 2020. As you highlight, that's basically being offset by EUR 10 million negatives for Sensile. That implies, if I'm correct, that the EBITDA margins of your Plastics and Primary Packaging Glass business will be broadly flat, which seems to me somewhat of a surprise given your comments about operational leverage growth and ongoing efficiencies that you've been working through and demonstrating in 2019. What are the counter forces that would lead to flat margins in Plastics & D evices and primary packaging throughout the course of 2020? Thanks.
Just to step into this. In practice, we see a very slight, I agree with you, it's mathematically difficult, but we see even a very slight increase there in reality, but very slight. The key thing is that PPG, we will have a margin improvement. You will not see this for the area of PPG, for Plastic & Devices. The key reason is in the end, it's somehow in this business, it's a product mix effect what we see in 2020. Going forward also there, so in 2021, and also given that we're investing now also OpEx we will have in the area of Skopje and so on, which is dragging slightly relative on the potential to have economies of scale here. That's a little bit the reason. You will see in 2021 also a nice profitability increase in the area of P&D.
Okay, thanks very much indeed.
Somehow, PPG here.
Understood.
The next question is from David Adlington, JP Morgan. Your line is now open. Please go ahead.
Hey, guys. Thanks for taking the questions. Some technical questions just around some of the numbers. Just wondering if you're able to quantify the FX impact on both top line and margin, as things currently stand. Just with respect to IFRS 16, obviously EUR 10 million benefit at the EBITDA level, but I suspect there's some offsets in terms of higher depreciation and interest further down the P&L. Maybe you could give us some help with depreciation and full year financial expenses as well. Obviously, the tax rate's been banging around a bit over the last few quarters. Just wondering if we could get a clarification on tax rate for 2020. Away from the numbers, just you've been one of the only companies so far this reporting season that hasn't mentioned coronavirus.
I just wondered if you could give us your thoughts on the impact or potential impact there. Thanks.
Just to start with the IFRS effects of depreciation and so on. Basically, these are, as you mentioned, EUR 10 million and really roughly now, probably this will translate in EUR 9 million depreciation and EUR 1 million interest. Something like this, it's really of the change here, just ballpark. In the end, I don't see any negative impact and implication on the net income. I looked at it before. This is so far the IFRS question is concerned. Your first question was referring to.
Foreign exchange.
The FX effects, I think basically we have EUR 10 million on sales and EUR 4 million on adjusted EBITDA. These are the FX effects for 2019.
Okay. Just to help in terms of the absolute financial income line, absolute depreciation for the year.
Just give me a second. Should be EUR 112 million included IFRS. EUR 112 million, period. Yeah. Including IFRS 16 for 2020.
That's the depreciation.
Yeah.
Financial expenses.
Then you can basically use your EUR 25 plus the EUR 1 million. It basically built the same level, probably the same level as in 2019.
Understood.
Yeah, I will take over the coronavirus. Why didn't we talk about the coronavirus a lot? There's two aspects with this. One, it's not clear how much it really impacts the economy of China in total. The key reason is the impact on us is actually not so big, especially not so far. We have, as you know, five plants in China. Two of them, one of this is device, one is plastic, which are relatively small facilities. The three key plants are all glass business, where we, by extra permission, were allowed not only to start production after Chinese New Year Monday, where the plastic plants facilities actually started, but already one year ahead. We are on full production. There's no influence, no impact so far. That's why it's relatively neutral so far to us.
Understood. Thank you.
Yeah. I see this with two things. You could also see quite a potential opportunity for us if you see a Chinese government for the next years to decide that there will be a vaccine for flu law, then of course, it would be a fantastic opportunity for us to grow our sales with syringes.
Just as a tax advisor, I'm very happy for your question. I forgot to answer this. About the tax rate for 2020, I would calculate for around 30%, 31% for 2020 for your model. We will look at it that we say we get it around for the 30%, but we're working on this item as well.
Great. Thanks so much.
The next question is from Michael Friedrich, Deutsche Bank. Your line is now open. Please go ahead.
Hello. Thanks for taking my questions. I would have three, please. Firstly, on your midterm guidance, which now calls for mid-single-digit sales growth, can you further specify what you mean by mid-single digits? Before today, your guidance called for the 4%-7% growth in 2020 to 2022. Do you still assume that this range is possible, or is it slightly different now? Secondly, also on the midterm guidance, in which year do you roughly intend to reach the 23% adjusted EBITDA margin now? Is that still possible in 2022? Thirdly, it looks like you slightly increased your CapEx guidance for the midterm from 8%-10%. Where do you plan to invest these additional 1%-2% going forward?
Yeah. I take over the questions because in the end, what we actually changed was a little bit how we named the guidance. We actually didn't change the guidance. Mid-single- digit is in the frame, which is identical with the old term. It's from 3%-7%, 4%-7%. We actually didn't change the guidance, and I don't expect that we do not deliver to the guidance, however you take the old one or the new one. Which is really different is what I mentioned before. We believe that we can deliver the guidance based on the core business without Sensile. If Sensile digs in, this will come on top. Of course, most likely, you will also be able to see the upper end of the former given range. The second part is the 23% margin, which is something we see at the end of the planning period.
As we now plan from 2020 to 2024, it's more at the end of the planning period. We will see a steady increase of the margins toward the end of the planning period. The CapEx guidance has actually not changed much. What has significantly changed is how we see the guidance. I would like to, one more time, remind you on the formula I gave you, and that is the difference. We will, and that is something I want to see from 2021 on, you will see the 4% base CapEx plus growth. It's very clear, if we then spend 8% CapEx, you will only see 4% growth. That's why the guidance is 8%-10%, because probably 4% of growth is not enough. Where do you spend it? It's unchanged.
Our capacity increase, mainly, especially after 2021, it's very strongly into capacity increase. Until then, 2019 and 2020, I think we mentioned it a couple of times, it's a lot of digitalization. It's process improvements, these things. It was necessary in 2019 and 2020 to do this, to bring our plants back on attack mode. From 2021 on, we will mainly see this for growth.
Okay. Thank you. If you end up spending 10% beyond 2020, we can assume that you are able to deliver 6% of top-line growth?
The mathematics would show this, yes.
Okay.
If I decide to spend 12% CapEx, you should be happy.
Okay. Thank you.
The next question is from Oliver Reinberg, Kepler Cheuvreux. Your line is now open. Please go ahead.
Yeah. Thanks for taking my question. Oliver Reinberg from Kepler Cheuvreux. First question on operating cash flow. In your segment accounts, I find, obviously, the operating cash flow by division, and here, the operating cash flow actually declined by 20% in the full year for both divisions, Plastics & Devices and PPG. If you compare that over the last two years, that was actually even down 30%, despite no meaningful change in the EBITDA. Hence, in other words, the cash conversion has deteriorated. Can you just discuss this, what was affecting that? Secondly, on capitalized R&D, I noted that the capitalized R&D was coming in at EUR 6 million. There was a rather small amount in the past. Two questions to this. One, is this EUR 6 million actually gross or net? I realize that you also wrote down EUR 4 million of capitalized R&D.
Secondly, as part of your new business plan for Sensile, do you expect this kind of capitalized R&D charges to go up in your budget for 2020? Last question, can you just provide an update on U.S. client, which was showing some kind of weakness in the past? Is this recovering? Any outlook here would be great. Thanks so much.
Just, Oliver, to understand your question, the second question better, the EUR 6 million, what you're referring to?
The EUR 6 million, it was actually EUR 5.9 million, and that is the capitalized R&D that you show in your annual report, and I think the year before was EUR 1.3 million. When you look at the data between adjusted EBITDA and adjusted EBITA, you referred to EUR 4.2 million write-down on capitalized development costs. The question one is the EUR 6 million or the EUR 5.9 actually a gross number or a net number, or is it actually like if I have to add the EUR 4 million on top, EUR 10 million? Secondly, do you generally plan an increase in capitalized R&D?
From my perspective, just for talking for 2020, I don't expect that we said we increase here the capitalized R&D. Indeed, if you have development in the area of Sensile, you have always to ask whether you can have an intangible asset or not. We don't plan for higher capitalized R&D. Part of the write-off was also definitely linked to capitalized R&D in the relation of Sanofi and the Verily contract. Probably, I think it was also EUR 6 million or something, EUR 6 million-EUR 7 million, what we needed to write off in this regard for 2019. Yeah, regarding the operating cash flow, it's highly impacted by CapEx. That is why you see a decrease in operating cash flow by division. That's important.
Don't forget, it was our highest CapEx spend year, 2019, and that's in the end of the day, the result of it, of the operating cash flow. We have here a very specific definition, if you ask me. Since the beginning, if you look at our numbers, we basically say we have our adjusted EBITDA, then we use our working capital and CapEx, and then we end up with the operating cash flow. That's the reason for it, of the decline.
I think I take the third question, which is referring to this U.S. client that is a top-secret client, which is Pfizer. It's the Pfizer Hospira facilities. We are today actually not seeing much improvement here. What is helping us, though, is that we are now step-by-step compensating this business with other customers. That's helpful.
At this stage, you don't expect any kind of recovery during the course of the year?
Yeah, they talk about a recovery, we don't see the recovery so far in our volumes. The recovery that we see actually at the moment is because I mentioned before. We are compensating with growth with other customers. The pity here is that with this client, U.S., that you see our market share is, of course, very high. Our share of wallet is beyond 80%, that is not one-on-one the case with the other customers. You see the growth with the other customers that is slightly compensating this situation.
Okay, thanks so much.
The next question is from Daniel Wendorff, Commerzbank. Your line is now open. Please go ahead.
Yeah, thanks for taking my questions. The first one would be on Sensile Medical again, please. What makes you so confident on the SQ Innovation project? To my understanding, it's still quite a young company. What are the next data points here? That would be my first question. The second one is an add-on or a follow-up, really, on Primary Packaging Glass. Q4 was really the second strong quarter for that business in a row. I understand the point on cosmetics, given what you just said on Pfizer Hospira, what is really driving the demand outside of cosmetics? Is it you gaining market share, or is it the market being better for you in both North America or Europe? Any more color there would be much appreciated. Thank you.
Yeah. What makes us confident with the SQ Innovation project? The company is new and is young, but the drug, the furosemide that they're working with this heart failure is not a new drug. What makes us relatively confident is that we are pretty far with the product, and the whole project runs in principle on plan. I cannot disclose all the details, but in principle, what we are doing at the moment, we are far ahead. Design freeze was done end of last year. We are now preparing the clinical study together with the customer. The clinical study will take place over the summer this year. We believe that after the summer, with positive results of the clinical study that we all hope for, are able to file the project with the FDA. That usually takes nine months.
If this then also comes to a positive result, we should be able to produce. The projects for lines, the small volume lines are already running, but the mid-size volume lines are then in execution. We should really be able to start production by, call it summer, fall 2021, which is on track. By the way, it's not only SQ Innovation, also the other project with EVER Pharma that so far only shows very small volumes, will develop in a good direction and will be able to show better results in, let me say, summer 2022 and 2023. Coming to the glass. Q4 was the second strong quarter in a row, we will also see this for the next quarters to come. Where is this growth actually coming from? Some of the things are really easy because they are new businesses.
I spoke about the ready-to- fill vials. I spoke about the glass business, Elite glass. The majority of the growth actually comes from, on the one side, demand in the market and also increasing our share of wallet with existing customer. Why is this all of the sudden happening? It's principle, the CapEx you see in 2019, that is now translating into better products in a higher efficiency, so in a better excellence. We have customers that are more switching towards Gerresheimer products because they are superior to the products of the competition. Of course, the cost competitiveness we have gained in the plants with state-of-the-art processes, of course, also helping us to quote in a better way.
I can give you a couple of examples. Tubular glass in Europe, there's a lot of areas beyond the cosmetic business that are showing growth. In the cosmetic business, if you look into 2019, it was already good, but the margin was not so super attractive because a lot of the additional sales were generated with a decoration we had to do outside because the internal capacities were far from being enough. This will also change over the loop of 2020.
Okay. Thank you. Very helpful.
The next question is from Chris Gretler, Credit Suisse. Your line is now open. Please go ahead.
Thank you. Good afternoon, Dietmar, Bernd. I have first a clarification question. Just now on the base of your growth guidance. Is this actually the underlying number, the EUR 1,410, or kind of the actual reported, the EUR 1,392 on revenue?
Thanks for the question. Just to clarify this, I simplify the things now. We basically used our underlying revenues, which were EUR 1,398, plus the FX effects of EUR 10. You come actually at the number of EUR 1,408. You have to deduct, I think, EUR 2 million-EUR 3 million because of we sold our Argentine business from plastic. You need to deduct this for M&A. That's the key calculation. You end up with EUR 1,406. We used our underlying performance, EUR 1,398, for making our guidance for 2020.
Okay. That's very helpful already. Just basically on the glass business now, that continues to be a very impressive business now. Could actually speak on the capacity utilization at the moment. I might have lost a bit traction with all the investment that now are going on. How much leeway for further growth is there with existing capacity or with the planned expansion project that you have coming up?
I wish I would have more already. There is no doubt we increased the capacity of the Essen plant last year, this capacity actually is not immediately available, because it is not only the furnace, you also need the additional machines. To make full use of the additional capacity, step by step will take over 2020 and also 2021. We will further increase the capacity with the Lohr expansion in 2020, which is this year. The capacity that we need for the cosmetic is something we only generate in 2021, where we do the renewal of the furnace in Tettau and also in Momignies, the Belgium facility. The decoration capacity is definitely something that we have available. A little bit aside of the glass, it's in the end also glass, is of course the syringes.
We should not forget that the syringes grew double-digit last year. They will also grow double-digit this year. The new ready-to-fill line that we built and invested in 2019 will be available in 2020. Obviously, some delay in there to set up the line. We should not forget that this line gives us an additional capacity of ready-to-fill syringes of around 100 million units a year. Also this is something that would help us with quarter three, step-by-step quarter three 2020 and then the next years. As I'm already talking about this, we should not forget that in 2020, we do another investment in this ready-to-fill six line that will help us then with summer 2021 with another 100 million units syringes from the capacity.
Okay. That sounds clear enough. Just actually one last question on the phasing. Is there anything that you can hint us and give us some guidance on how we should think about the current year and phasing of growth and your margin performance, maybe? If, for example, if you have some furnace repairs or kind of maintenance, et c. Any kind of guidance there would be helpful.
Basically regarding the phasing, if you see now 2019, just to start with, was in the end front-loaded more or less because the first six months were quite strong. This is something to consider if you look at 2020. Indeed, the 2020 will be slightly back-end loaded and the real strong growth kicking in the second quarter, third and fourth quarter. That's our perspective. About the margin, it's difficult to discuss now. I have to look into carefully, but in the end, it should follow the same pattern that where you have more revenues, you should have also a higher margin. Conceptually, it's clear.
Okay.
Decent good margins.
Yeah. Got it now. Thank you. That's very helpful.
Thank you. In the end, you have to come back to the very first question from Goldman Sachs. Yeah. It's all about delivery. The guidance is relatively clear. We have this mid-single percentage of growth. We have our 21% EBITDA, and we have 12% CapEx. The revolution out there in the market would be when finally Gerresheimer this year delivers, and that's what we are aiming for. Yeah.
Got it. Thank you.
The next question is from Alexander Galitsa, Hauck & Aufhäuser, your line is now open. Please go ahead.
Yes. Hi. Thank you very much for taking my question. Just maybe to clarify on this SQ Innovation project. Have you actually managed to get further in the development approval pipeline with this project than it was the case with the project that have been canceled? That's the first one.
Yeah. It's an easy one. Yes, we are further than we've been with any other project beyond EVER, of course, that is in the market. We spoke about this sc Pharma and also the Sanofi project. We are significantly further developed. Yeah.
Okay. Understood.
We have to be fair. The pump that we are using for SQ Innovation is in principle
A simplified version of the Sanofi project and that all the complicated portions in the Sanofi, they are not existing because the pump is a slightly simpler one.
To clarify on the adjusted EBITDA margin targets for 2020, you say that it is 21% roughly including the benefit from IFRS 16. On the midterm, you have 23% margin target. If I understood correctly, you mentioned that this one does not account for the tailwind from the IFRS, we're actually looking at 24% the more, the direction?
It's well calculated, Alexander. First of all, to start with the 21% in 2020, we are very transparent on that. This is a part of this EUR 9 million-EUR 11 million in IFRS 16. Basically, in the base business, you have this 21% without the support. We use this kind of funds for, I repeat this, technically for Sensile, for the -EUR 10 million for 2020. For the midterm, indeed, our guidance, what we have given this 23%, we're doing basically without IFRS 16. That's our idea.
The question is always, it's so far behind, yeah, in 2023, 2024. I think you have to see this somehow a little bit opportunistically, how we are handling this and we have to look at these topics in 2020, 2023. It's by far too early.
Technically speaking, it is what I just said.
Okay. Two more. There were reports on shortage of heparin due to API bottlenecks. Do you see the potential effect on the ramp-up of the new facility for pre-filled syringes, or you don't see any effect on that?
No, we don't expect any effect on that at the moment. I could definitely sell 10%-15% more of the syringes if I would have the capacity.
Okay. Lastly, in general, if you could give a little bit more color, how do you think about the structural growth profile of Gerresheimer? You say that this mid-single- digit percentage range you could achieve without Sensile. Are you confident to really grow that much organically through 2023 and also beyond if no projects from Sensile are kicking in? How do you see more of a structurally not till 2023?
In the end, this is what we actually did with our process that we started in early 2019 when I started in the company. We refocused the company on the capability to grow in the base business, which I think is absolutely core. It's nice if you have this additional, I call this in Bavarian way, sugar on top babies, like the Sensiles, but you have to make sure that you grow your base business. That's what we are focusing. That's in the end now what you will see in the next year that will give us the growth is the base business, because until the Sensile digs in, it is 2022, or let me say it's 2023, before they dig in. When this business digs in, then we can start about significantly higher growth rates and also significantly better EBITDA margins.
What we believe is that we can deliver the guidance based on the growth of the core business, which is an attractive and good business with a lot of potential. You will see this. It's both the glass side, molded converted glass. You will see this in the plastic side, which is by the way, also very attractive business, and you will also see this in the devices.
Okay. Thanks a lot.
We have a follow-up question from Scott Bardo, Berenberg. Your line is now open. Please go ahead.
Yeah. Thanks so much for the quick follow-ups. You mentioned within your presentation, Dietmar, that there's a focus on biologics and also on innovative products, and I appreciate that some of your peers in the market report those lines for investors. I wonder if you'd give us some sense or flavor as to what percent of group revenues today relate to biologics, what percent of group revenues relate to innovative products without, in a sense, double counting there, maybe if you can give some flavor there. Just lastly, just with respect to the sort of immediate midterm or end of the planning period comments on EBITDA margin. Can you please give us some sense of what you're thinking here with respect to the contribution of Sensile?
Is that an outlook you give over the medium term without any material positive impact from Sensile, or are you assuming here some positive contribution? Would appreciate some qualification.
I take the first one because the third I didn't even understand.
I will take the third.
The biological topic, I have to give you a guess because I do not exactly how much we really have in biological. It's not that Gerresheimer has no business with biological customers because we have, of course, today a lot of vials and syringes. Rough guess, don't nail me on a single percentage, is let me say some 5%, 8% of the business is what we do with biological today. I clearly see the potential to triple this. It is a clear area that we, of course, as a customer, approached already in the past. Not with the clear focus on biologicals, but just as a packaging, not as a packaging solution. It was one of the areas which was not approached in the right way from Gerresheimer because of our lack of capability to do cross-divisional and cross BU business.
That has, with the elimination of the silos, really changed. That opens the possibility for us to not only sell a product itself, a vial or a syringe or an ampoule, but also supply the broad portfolio of service, of capabilities that we definitely have in-house. That will open the doors with a clear focus. We have now a key account management focused on these biological markets with their specific needs, and here I see significant growth potentials. It is challenging though. It is not only a little bit of sales. You have to be able to cluster your services, and you have to be aware that usually lot sizes in this market are much smaller, and investments that we, for example, did in 2019 in Wackersdorf in our small lot size lines is what opens the doors towards this market.
Scott, taking your second question. In the end, it's a little bit the logic. We don't want to overpromise and underdeliver. In this sense, we also basically excluded from our guidance Sensile. With the exception of 2020, because that's the reason why we have 21% margin because of Sensile, where we have a negative EBITDA of EUR 10 million for Sensile. Going forward, the mid-single digit growth and also the profitability of 2023 is without Sensile. We have not attached any euro into the guidance. It's something what really comes on top in the guidance is actually our Sensile contribution, if it comes. We are convinced about this, but this could really come on top.
That's very helpful. Maybe just last quickly. If some of these projects, advanced therapies materialize for the longer term for the business, is there any reason to assume that these won't be margin accretive for the group, i.e., could we see then more of a mid to high 20s EBITDA profile for the long term for Gerresheimer? If you could just indulge us there a little bit, that would be helpful.
No, this is not a difficult question. What we are doing here is significantly different than just a contract manufacturer. As we provide own intellectual property, the margins are definitely accretive.
Okay, excellent. Thank you, guys.
There are currently no further questions, so I hand back to Jens Philipp Briemle for closing remarks.
Thank you very much, operator. As there are no further questions, we would like to thank you for joining us today. Please note that we are going to publish our first quarter results for 2020 on April 9th. Thank you so much, and see you on the road or any upcoming conferences. Thank you.