Afternoon, ladies and gentlemen, and welcome to the Jane Opti Conference Call regarding the Interim Financial Statements 2018. At this time, all participants have been placed on a listen only mode. The floor will be open for questions following the presentation. Let me now hand the floor over to Doctor. Stefan Traeger.
Yes. Thank you very much, and good afternoon from here as well. Today, quite literally, a very warm welcome to our Q2 H1 earnings call. With me today in the room is Sieder Schumann, our CFO, who will guide us through the numbers in a bit more detail. Let me get started with our earnings call here by saying that the first half of twenty eighteen has been really very successful for
the group, I believe.
We managed to grow our sales and revenues by 10.4% in the first half, and we expanded our EBITDA margins by 230 bps, actually from 12.3 percent EBITDA of sales to now last year to now 14.6% of sales in the H1 of this year. So EBITDA has been at EUR 56,300,000, 31.4 percent more than in the first half of last year. As a result of the very pleasing development of our ongoing core business and a pretty good demand in some of our core and very important core markets. In combination with the acquisition of ProtoMax Automation Limited, we have raised our revenue guidance a few weeks ago. And today, we'll explain to you that we'll also raise our earnings guidance to 15% about 15%
or around
15% EBITDA of the expanded sales guidance and around 11% EBIT of the expanded sales guidance, including the PPA effect, which we are going to detail a bit later in the call. And we will also detail a bit more about the impacts of ProtoMax in the call. Not only has been the first half very successful in our ongoing businesses in terms of sales and profitability, The first half also has seen us investing substantially actually in our core businesses. We have communicated throughout both quarters actually investments and planned investments in our facilities in the south of Germany, Filling and Swening, and you see it on the picture of Page 1, verse 3, a sketch of how the new facility for our automotive business could look like in the future. We've also communicated investments in our France building in Bayouef, our automotive industry.
And pretty recently, we've communicated investments important investments actually in plant and equipment in Berlin, a factory in which we produce semiconductor laser devices in an area with very strong demand. And we hope that with new equipment, we'll be able to maybe fulfill our demand a bit faster than at the moment. But throughout the call, I will also shine a bit more or put a bit more color around demand and supply, in particular, in the optics business. So overall, as I said earlier, we're very pleased with development of the first half core business, but and of course, our investments in our locations. The biggest move though for us in the first half or actually just recently has been the acquisition of Protamax and which by the way, I think has been the biggest acquisition the company has made in a number of years, actually, I think in this decade.
And so therefore, on Page number 4, we've provided a couple of more of details around ProtoMx. And I guess it's fair to say that with the acquisition of ProtoMx, we've continued to move down the path that we've successfully started with the acquisition of Five Lakes Automation. Like 5 Lakes, Protomax is also focusing on machine integration and process automation for the automotive industry. With Protomax, we're now able to address a segment of this particular marketplace with higher project volumes. So Five Lakes has been focused and is focused on sort of lowtomidrange project values.
And ProtoMax now enables us to address mid- to high end projects in terms of value of the projects. The company is headquartered in Barrie, Ontario in Canada. It had a revenue in the fiscal year 2017, which for ProtoMax had been starting in November 1, 2016 and ended October 31, 2017, with revenues of approximately CAD65 1,000,000 and profitability of this company, ProtoMax, is clearly above the OpEx group average. We believe it's been a very good deal for us. Purchase price, we've communicated that, has been around 2x the expected 2018 sales and approximately 7x EBITDA of 2018 expected.
So as I say, good deal for us at least, and we're continuing to move down the path that we successfully started with the acquisition of 5 Lakes. Overall, I guess it is important to stress that a combination of automation solutions and laser processing here from Jena actually enables us as Synoptic to tap into additional growth potential in Advanced Manufacturing. And throughout the call, we will continue to detail on the financial impact of Potamax and also what it does mean for our forecast and for our new guidance for the year. Nevertheless, let's start by looking into the numbers in a bit more detail of what we believe has been a very successful H1. And then Dieter will lead us on guide us through those numbers.
Consider? Yes. Thank you very much, Stefan. Good afternoon from me as well. Please follow me on Page 5.
Here you see our revenue development throughout the quarters and the first half year compared to previous year. As already mentioned, very strong growth rate of 10.4%, leading and ending to €384,700,000 in revenue, which is an all time high for ENoptic for the 1st 6 months. And you see it in the quarterly revenue development was roundabout €195,000,000 It was a very high Q2 as well. Revenue too has been realized in all of our three segments, which Stefan Dreyer will explain to you later in a little bit more detail. We have still the strong demand in particular from the areas of semiconductor equipment and health care industry as well as scheduled and already talked about to you of toll monitoring systems with our customer, Tollpelet, in the area of traffic safety solutions.
So very, very strong tailwind. And now let's have a look on next page about the region where the strong growth came from. You see in every region, in Germany, 27% in Europe, 21%. In Germany, it's mainly driven by Tolprolate, our customer in Germany for the tall manufacturing for the pillars we have delivered. You see the only region where we have decreased is in Asia Pacific, where we have realized €44,000,000 instead of €53,000,000 a year ago.
And this is mainly caused by our Australian business where a project has run out. This is the main reason for this development. If you now then look on with me together on Page 7, please, you see that the earnings every earning figure we explained to you like EBITDA and EBIT have over proportional and stronger increase than the revenue. Our EBITDA has increased by 31.4% and our EBIT even with 46.1%. This is due to favorable product mix and a smaller increase in functional costs.
And with this having realized now, our EBITDA margin is, as already mentioned, at 14.6%, which is also an all time high for the 1st 6 months, like the EBIT margin with 11 0.1% for the 1st 6 months as well. Both earnings showed really a very good and strong improvement, which is obviously coming from the sales and revenue to that. If you now then follow me, please, on Page 8. Here, we have our P and L of the group in a little bit more detail, and you see the functional cost, the gross margin, financial result and the tax rate and taxes. And the functional costs, let me highlight these a little bit.
The functional costs have increased a little bit from €90,800,000 to €92,700,000 which is mainly driven by R and D and selling expenses. In R and D, we still are investing in our efforts for new and innovative products. And the selling expenses are going up in line with our growth rate, whereas the expenses we have been able to reduce. This leads to the EBITDA and EBIT figures I've already explained to you. The financial result has improved again in the first half year of this year compared to the first 6 months last year from minus €2,100,000 to minus €1,600,000 This is mainly driven by a positive currency effect in the silo from currency gains minus currency losses.
We are now a little bit positive, whereas we have been negative in the last 6 months in the prior year, the first 6 months there. This leads to a very high increase in the earning before taxes. And the earning after taxes is also very high because we have a decline in the cash effective tax rate to 14.2%. Prior year, we have been at 15.3%, which is also particular due to the U. S.
Tax reform where we have positive impact on these sites. All in all, it leads to earnings per share in euros of €59 compared to €40 last year. Then if you then please follow me to the key performance indicators we are looking at, which give us a new and impulse how the business will develop throughout the rest of the year. Order intake and order backlog on Page 9, you see here that we have in the Q2, obviously, a relatively good development in the order intake. We could catch up with a relative weak start in the Q1, and we have an increase realized in Q2 alone on the order intake side by 7.2%.
So in accumulation after 6 months, we are now only a little bit below prior year, it's €397,200,000 compared to € 405,000,000 This is mainly the fact because of the Defense and Civil Systems segment, which Stefan will explain to you in some minutes. And there we had to remember, we had a very strong start in the last year, which has shown strong order intake development. But even after 6 months, the book to bill ratio is above 1. It's 1.03. And this is a good development in Q2.
So we are optimistic that for the rest of the year, this will steadily improve. There you see the order backlog. On the right side, the order backlog is a little bit above or at the same level like at the year end, 2017, euros454,700,000 For us, a good basis for the coming months. We assume that 66% of this order backlog will be converted to revenue in this year, which gives us also a good basis for our prognosis and guidance for the rest of the year. Then please follow me to the next slide on Page 10, where we have shown you the free cash flow development.
It increased to a good basis for future investments. It's positively influenced by our operating profit. Then we have a little bit higher increase in working capital. It's it has been grown to EUR 227,100,000 compared to EUR 212,800,000 a year ago after 6 months. In particular, it's due to higher operating receivables in relationship to the higher sales increase.
So it will be realized in cash and cash flow in the months to come. Resulting capital ratio is at 29%. We have always talked about our target at to come to 30%, around 30%. So we are still at 29%, which is good. And in the prior year, at the end of June 2017, we have been at 30.1%.
The investments have been a little bit lower than in 2017 after 6 months. But as Stefan Reger has explained to you in his starting statements, we have some investments in front of us, so the investments will increase throughout the year. The free cash flow roses in follow-up of this development from EUR 22,100,000 last year to now EUR 28,800,000, which, as I already mentioned, is a good and a solid base for the development in the second half year. Having said this, I'd like to hand over back to you, Stefan, that you can explain the segments of our businesses.
Sure. Thanks very much. And let me take you to Page 12 right away. Let me start with our optics and life science business. In optics and life sciences, we've seen a really continuing very high demand in some of our very important market segments, in particular in the semiconductor equipment industry, but also positive development in health care and in industry.
As a result of that, the sales in optics and life sciences grew to now almost 140,000,000 in H1, which is really a very strong, strong development, growth of 11.7% versus the same time previous year. Driven by that volume increase as well as an ever more favorable product mix, we've seen another step up in our profitability in this business. The EBITDA of our Fixed and by Finance segment is now at 32 point €4,000,000 which is 22.4% higher than H1 1st year previous year. And the EBIT margin now came to 20.6%, so remarkably higher than an already very strong H1 in 2017. Very important for us, obviously, is order intake in that business.
We have seen another quarter with good order intake in optics and Life Science segment actually. On a very strong comparator 2017, the segment managed to again grow order intake by 5.7% to now €157,500,000 which is really strong. Let me remind you that the book to bill rate is still clearly above 1 for this business. In other words, we've managed to again expand the backlog of the business by almost $60,000,000 versus the end of last year, which also does indicate that the biggest probably the biggest sort of lecture for the group for more growth is the ability to ship more product out of this business. We're not limited by demand here.
We're really limited by actually the ability to ship. And that is influenced by an ever increasing tightening of our supply chain and the availability of skilled labor. And we've talked about that a number of times in the last few calls as well as in some one on ones, and I think I stressed that a number of times. We could grow faster if we would be able to recruit more skilled labor, in particular, for our optics and life science business. So if it comes to core growth, where the limitations are more around tightening supply chains and the liquidity of skilled labor than around the demand in our optics and life science business.
Overall, though, it remains to be said that, again, optics and life science, we're very, very pleased with. In particular, in the semiconductor industry, we continue to see very high demands and are also very positive about the development in our Healthcare and Industry segments in optics and life sciences. So that's it. Let me guide you to the next page, Page 13, in our Mobility segment, which has, as expected, it has to be said, seen a very strong H1 2018, driven primarily by the delivery of our toll monitoring system. And as a result, the business has seen significant improvement in sales and profit.
Revenue grew by 17.6% in the 1st two quarters, And the increase really has been driven by both businesses. Our Traffic Solutions business obviously dominating the growth with the expected and scheduled delivery of the TORM monitoring systems. But also the automotive industry, we've actually seen good growth in the first half of this year. As a result of that, the profitability of this segment has significantly increased. As expected, we have seen an EBITDA we post an EBITDA of €16,100,000 for this segment in the first half.
Now again, that is as expected because they are due or driven by the delivery of the toll monitoring system. And again, it has to be said that the last year has been, in particular, impacted by onetime effects from our investments into these 4 pillars. In a way, we're now harvesting from what we invested into last year. Ore intake in the segment has been flattish, some decline, a slight decline of 2.9% in the marketplace. We have seen actually positive order intake development in the automotive industry, in our core traffic solutions business, which traditionally is very lumpy, you have typically large projects.
We haven't seen large projects coming in the first half of this year. Again, so it's a very lumpy business. But by and large, a flattish, slightly negative auto intake development for this segment with some positive momentum in the automotive industry and industry have lower money for very closely at the moment. But we have seen a positive development there and some slower or missing of larger projects for our core Traffic Solutions business impacted that. That's that.
Let's go into our Defense and Civil Systems segment, which has been flattish throughout the first half. Slight growth in sales by 2.7 percent to now €108,200,000 EBITDA in line grew by 3% to €11,700,000 Margin is now the EBITDA margin is now at 10.8%, which compared to a few years back, that's a good result. And yes, we're pleased with that. Order intake is negative double digit, minus 10.2 percent for this segment for H1. However, let me remind you that we had a particular difficult comparator in Q1.
The order intake in the 2nd quarter has partially been very strong. In the 2nd quarter, the order intake for the segment grew by 34 point 1 percent from €42,000,000 last year to €56,300,000 in the Q2 of this year. So we're catching up from this particular onetime effect that we have seen in the first half. Overall, Defense and Civil Systems, as I said, good solid development of sales and EBITDA. And obviously, we're hoping to see an improving order intake figure throughout the remainder of the year.
Now let me actually spend some time on our new 2018 guidance. Following the very good demand in some of our core markets and obviously, I'm particularly talking about semicon and some other core marketplaces, following a very pleasing development of our core group business in H1 And combined with the acquisition of Protomax, we have already increased our expected revenue guidance for the group overall in 2018 to now between €805,000,000 €820,000,000 In this revenue guidance, we have dialed in, as a sort of an indication here, We have dialed in a bit more than €15,000,000 sales contribution from ProtoMax for the remainder of the year. We've also now raised our targets for EBITDA and our EBIT margins. We believe that the group combined on the bigger business will be able to produce around 15% EBITDA margins and around 11% EBIT Margins, as I say, on the higher sales number. Included in that, we have already we already have included in that PPA effect, which negatively impacts the group's EBITDA number by around €1,500,000 and the group's EBIT number by around €5,000,000 dollars Please do let me point out that the acquisition related effects in terms of numbers here are really very preliminary.
The Protomax business is a very, very project driven businesses as we have in our businesses quite a lot. And so the nature has it or the nature of this business has it that with it being such a project driven business, there are quite a number of contracts we're now going through and assess how we have to and can translate them from Canadian GAAP into IFRS 15. Now Canadian GAAP has quite a different way of revenue recognition compared to IFRS 15. And so therefore, all the numbers with respect to Protomart's are really preliminary on the top line as well as on the margins and in particular around the PPA effects. But yes, we're very pleased with that acquisition, As I already indicated, including the PPA effects, due to our very strong core business, we're actually able to raise our guidance on EBITDA and EBIT for the group for the year.
We do see some potential, shall we say, tailwinds, some chances for even better numbers for the rest of the year, but we also see risks. The chances that we've seen is that potentially, we could see an even better than anticipated combination of 5 legs and ProtoMax, which could contribute could contribute to a higher sales figure in the automotive business. But we've also seen some significant risks actually to do with political uncertainty. We all know that the political environment continues to be very volatile. And as a result of that, the FX rates are pretty volatile at the moment.
Currently, we have a good development in the last few weeks. The in particular, the dollar to euro rate has developed in a good way for us. But we all remember in the last earnings call, we were saying that, oops, the FX rates are pretty negative at the moment. So at the moment, FX rates are okay. But given the political uncertainties, we are very cautious that, that could, in the volatile environment, go back to an area where it's not as positive.
And then again, I do have to stress that again and again, the risks around supply chain, in particular for our optics business and the ability to higher skilled labor. Really, the biggest if you want, the biggest hurdle for more growth in the group in our core business is the ability to deliver. We do see and continue to see strong demand, and in particular, in our OpEx business. And we do all we can to get more skilled labor and to make sure that our supply chain actually hold. And at the moment, they do, but there's quite a lot of tightness in this area.
Well, so with that said, again, we're overall very positive about our business. We believe we have had a very strong H1 with, again, 10.4% growth in our business in the first half, a good step up of or actually a real step up of profitability. We look into the second half of the year with a lot of optimism, and we obviously do hope that we will be able to continue to communicate good news throughout the year. With that said, let me pause here. Thank you for your attention and radio for your questions.
And the first questioner is Craig Abbott from Kepler Cheuvreux.
Yes, good afternoon gentlemen. Couple of questions from my side. First of all, you mentioned that you're quite optimistic that the order intake will likely steadily increase throughout the rest of the year. I just want to make sure I understood this correctly. Is that your general thinking across all three divisions?
And then carrying on from this line, I thought maybe you could give a bit of color on the customer pipelines per division. And obviously, in particular, optics and life sciences, which actually was down 19% sequentially. And obviously, we've had some headwinds being announced by some players in the semi space calling for somewhat slower second half versus the first half. I just wondered if you could give us maybe a little bit of update there. And also you mentioned several times supply chains are tightening.
I understand on the personnel side, which you're trying to alleviate. But on the supply side, could you maybe be a little bit more specific on what kind of potential risk you might be facing here in terms of potential impact on the gross margin in the second half and going forward beyond that? Thank you.
Sure, Greg, and good afternoon, and thanks for your questions. On that order intake note of mine, the steadily increase was referring to the DCS business and the fact that we had a difficult competitor in Q1. Q2 has been very strong in DCS, and obviously, we have to see how the second half develops. But there's no reason to believe that we fall back on the DCS side. So a steady increase was particular in the DCS.
However, you do or you did ask around semi space, and that is something that we all monitor obviously very closely. And I can repeat actually what I said a number of times in the last few weeks months. On our end, we do not see any slowdown here. Yes, we have it's a lumpy business, but it has its ups and downs in the quarter over quarter comparison. But we in terms of like pipeline and the like, it seems to hold.
Obviously, we're monitoring the same things that you guys all monitor, and we've discussed it on a number of things that we all don't. None of us has a crystal ball here. And it's getting more and more difficult to look beyond, shall we say, a few weeks or months. Although I have to say, our customers and you all know we talk about the typical household names here, our customers keep telling us that they're very, very positive also for 2019, at least the first half. And obviously, and Craig, as you know and other and your colleagues out there, we are supplying to semiconductor manufacturing equipment suppliers.
And there is a bit of a difference in the cycle here. So in summary, in the silicon space, we do not see a slowdown at the moment, and we're looking very comfortably, shall we say, into the second half in this business. In terms of supply chain, that's an interesting one. So what I'm referring to is the following. Not all the optics, in particular in the semicon space, we're building ourselves.
In other words, we are able to breeze a bit in demand the lower spec stuff, so the more simple optics that we have or that we sell on to our customers, we're actually producing or we actually use suppliers to produce that for us and in particular, on lower end of the value chain, if you want. We have they produce it for us. And they see the same demand out there apparently. And it's getting more and more difficult to make sure that we get the required quality. And that's because they're under pressure and roll under pressure, and we are very committed to quality.
So often, we have to actually do some rework there and get makes it even more difficult. We don't see a lot of price pressure at the moment. And you were indicating, is there a price pressure? Do we see inflation here? We don't see that in the moment, but that could be an effect of long term contracts that we have in place.
So whether there's going to be inflation in this play chain in the future is a hard thing to tell. But at least it wouldn't be that much of a surprise given the environment we're in at the moment. There's another effect, and that's the availability of raw material. Here, what I'm talking about is some very specific optical materials, just to mention a particular material, the calcium fluoride, optical material seems to become more difficult to get at the moment. And that is a result of actually there are only just a few suppliers of this particular material left.
So that's the other if you want, the other side is the coin in the supply chain equation here. We're still okay, but I just have to again and again mention that because just the other day, I met a customer and they were saying, look, please do deliver a bit faster and why can't you just order more machines? And I keep telling, look, I mean, I can buy machine. Well, at the moment, it's even difficult to get machines. Yes.
I put it head on and head on as well. Even if we would spend more money on it or we do spend more money on it, but it's even harder to get machines at the moment. But the machine in it by itself doesn't help. I need somebody to put in front of the machine to actually produce something. And that's why I'm saying the availability of skilled labor, in particular, in optics and here in Jena, it's a challenge.
But that's something that we're managing. I mean, it's something that we're talking about since a number of months now. And we have to see we're doing what we can to get good people. We will certainly not jeopardize in quality. Quality is something that's very, very important for us and for our reputation, for our brand.
So people buy from us and not from others, and we'll not jeopardize on that. I hope that answers your question. At least it gives you a bit more color.
It. Absolutely. If I could just one quick follow-up, please, on the calcium fluoride market. I mean, I just maybe give us some kind of broad indication about how sensitive you could be to that. I just want to know like if those prices were to move 10%, 20% or even worst case, what's the sensitivity to your earnings, I guess, in that division?
I don't expect a precise number or something like that. But just to give us a sense of how important in terms of your gross margin sourcing that material is.
Sure. Look, the interesting thing is we don't need that much actually, And it's not a huge part of the bond. However, without it, you can't produce. If you buy a car, the steering wheel in and by itself is not a big part of the cost of the car. But if you haven't got the steering wheel supplier anymore, it costs like that.
That's the analogy that I would
use. Okay. Okay. All right. Thank you very much.
The next questioner is Malte Schaumann, Baboqu Research. Over to you, Mr. Schaumann.
Good afternoon. A couple of questions. The first one is on the Mobility segment. Could you maybe elaborate on the revenue development, especially in Asia? You mentioned traffic project in Australia.
I thought you gained the follow-up project. So maybe you can elaborate on why that is giving a time gap or kind of a gap in sales development?
Yes, good afternoon. Good question. Look, the fact that's familiar is that we actually lost a project in Australia in terms of traffic monitoring. And that has an impact on our revenue development in order intake sorry, on our order intake development in that segment. And when I came to the business, I was a bit surprised about the importance of Australia.
I mean, I love the country, but it's not that big a market. However, for Genoptix, it's actually one of the biggest markets in Asia, funny enough. And that is because the business has been very strong in traffic solutions in Australia. And we've just lost we just lost the follow on contract there. And so therefore, the negative development.
Okay. And generally, in order intake, you said that order generation and traffic had been generally a bit slower. Was that generally to slower market development? Has there been less number of decisions? Or did you lose more projects to the competition than usual?
Well, we lost an important one in Australia. That was that's something that we really actually lost. There are a couple of bigger ones in the pipe, and obviously, we hope that we can land 1 or the other in H2. Remains to be seen. But there are big projects out there, and we're pursuing them.
Some of them are, as I say, in the pipeline, and we have to see to what extent we can bring home those projects in the second half. We've monitored that very closely. But yes, I wouldn't say there is a particular downturn in the marketplace. Projects are there, and we'll have to make sure that we win them in the second
Yes. Okay. And then in terms of your new sales guidance, you increased the upper end less than the expected revenue contribution from Protomax. What's the specific area where you see kind of a slower development in comparison to your earlier planning?
Yes. It would be easy for me to say don't read too much into it. But then there is a reason. We did want to signal something with that, narrowing up the corridor, if you want. I guess what we did want to sort of signal here is that we have those risks on the shipment side
and not on
the demand side really, but on the shipment side. And even if we would be able to yes, it's let me rephrase that. We wanted to make clear that even with the even if the demand would go even higher, at some point, we're not able to ship more. And that's what we wanted to kind of like signal on our core business. Please be aware of the fact that despite order intake, we also need to be able to produce and ship an invoice in this year.
And so overall, we believe that the guidance that we've given you at the moment and with all the risks that we were just indicating, also in particular on Provenox, the uncertainties of those numbers and the translation from Canadian GAAP into IFRS. We saw that narrowing of the corridor is a prudent thing to do.
Okay. Understood. Then on the mobility sales development in the Americas, it seemed that had been a bit slower in the first half of twenty eighteen, if I exclude the 5 legs contributions. Any specific market development you see there or just the typical movements of projects?
I mean, we in the outer than 5 flakes in the automotive business in the U. S, there had been quite some uncertainties in the first half. So the growth of the Automotive business was, shall we say, stronger in Europe, yes, instead in the U. S. Yes.
I think that's fair to say. Obviously, we wouldn't like to go into much more details here as you can understand. But as an indication, I think it's fair to say that we have seen growth in the automotive business in Europe, but not necessarily that much in the core automotive business U. S, excluding Five Lakes, as you have already indicated.
Okay. And do you expect that market to stay in that level? Or do you see some kind of recovery to the former levels ahead of you?
It's a bit hard to say at the moment. I mean, it's not as if we do have a dramatic downturn there, and it's not that dramatic, if that makes any sense. But we'll have to see.
Okay. Okay. Fair enough. Then on the PPA effects, will these impact the gross margin mostly in 2018? Or will these show up in other lines in your P and L?
Maybe it's best transfer you to say that. Yes,
I will do it. Yes, Marjo, this is a good question and an expected question, obviously. As Stefan already mentioned, we are going through the evaluation and evaluation of these impacts and effects. We have a 60 days time line in front of us, so we have to end up with the final figures at the end of the Q3. But we have already some good ideas that I can explain to you that roughly roundabout at the actual status, we see a €1,500,000 less EBITDA on a group point of view coming from the purchase price allocation.
But the target, Protomax, is still delivering a good EBITDA, which means finally, the salvo of the operational EBITDA from ProtoMakx minus the group PPA is still positive, yes, even in the 5 months for the rest of the year. But in the EBIT, it's on the EBIT level, it's different. Where the target is still above clear, above book average, above 11% that is mean. But the purchase price allocation impact on the EBIT is relatively high. It's around €5,000,000 At the moment, we calculate the €5,000,000 And €5,000,000 are a little bit more than the EBIT on the operational base from ProtoMax is.
So if you take the operational EBIT for the 5 months minus our purchase price allocation, then it's slightly minus. So with the saying that our EBIT margin will be around 11%, we took already the hit.
11% on the combined business, the higher top line with products after purchase price allocations being actually slightly negative does tell you how, say, how strong the other businesses are performing at the
moment in terms of profitability. And coming from just to explain it to you, for the months to come, we assume that the EBITDA impact is only valid for this and the next year, and the next year is already much less. This has something to do with the over taking from our side of the inventory. It's an inventory step up. So the main impact in next year is pure on the EBIT side, And it's obviously coming from order backlog, customer relationship, brands and so on.
And this has more to do with the EBIT. So this I'd like to say that from the meaning behind this or the saying is that from the next year on already, from 2019 on, order marks will be positive for EBITDA margin. Yes.
Okay. Let me just one more time underscore what Hansita just said. We do believe that Protomax already next year will contribute positively to our earnings and margins actually. So we're more than accretive already in the 1st full year that we have the business within the group.
Yes. So at EBITDA level, if we only see PBA, etcetera, on EBIT level, Potomac should give you kind of a percentage points tailwind next year, right, assuming the high profitability of the business?
Certainly tailwind. Tailwind. Yes.
Okay. Okay. And then in
terms of capacities,
you mentioned that you're in certain areas restricted rather supply restricted. Is it then right to assume that maybe you are this is less of a problem in defense service systems and mostly mobility and then that mostly optics and life science is affected? And what does that mean for growth potential in 2019?
Yes, that's very fair. It's predominantly in the Optics and Lifestyle segment, predominantly, where we're limited. And what does that mean for the next year? Well, we have I mean, maybe an anecdote can put the most color around it. In our Berlin factory, if you order from us at the moment a certain semiconductor based laser diodes, we have to give you a order confirmation date of mid-twenty 19.
That's how much we're limited at the moment. So we can't ship, quite simply, before or give you shipping confirmation before for the next year. What does that mean for 2019? I mean, it's hard to say we are doing all we can to improve capacity. We have now invested again into we are about to invest in more machines.
As I say, we have to be able to mend them. We're running 3 shifts where we can. We do have a lot of order backlog at the very moment, which is why we're looking positively into the future. And yes, we hope we'll be able to build up capacity whilst at the same time, obviously, monitoring the market environments and to see if there is a cooldown at some point. But again, we don't see it at the moment.
Okay. Thanks.
The next question comes from Robin Brass, Hakan.
Yes, hello and good afternoon. Just one question from my side also on Protomax. Could you also like let us know, is there like a strong growth profile in the company? And because generally at least, I heard also some colleagues and also investors wondering why we're able to acquire a company just for 7 times EBITDA given the high margins? Well, we were able to acquire that company for a good price because we are a strong negotiation team.
No, look, obviously, we do believe that there is a growth case. Otherwise, we wouldn't actually purchase it. Now it's always a question, what's a good deal? Is that do we overpay? Do we overpay?
Do we pay the appropriate amount of money? We believe it's been a good deal for us. What we really do or why I guess a better way to answer the question would be actually to say, what did we bring to the table for Protomox so that they had been so interested in actually going with us and not with somebody else? Firstly, I think we could clearly make or show them what we printed table for them in terms of growth potential. They do see as much as we do the ever increasing importance of optical components in production for in particular in the automotive industry.
So laser based processing or laser processing that we supply will become ever more important for the automated manufacturing of cars. And that's something that we bring to the table. And now a lot of people in their core segments do own that type of technology. Also, what we bring to the table for them is international sales channels. At this very moment, they sell to the automotive industry around Michigan and Ontario.
So they're basically selling to customers in and around Toronto and then around Detroit, which, as I say, is about 4 hours car ride distance. And we can open up for them customers now in Europe and potentially also in Asia going forward. Now that could be said for others as well. What I think made us a very attractive acquirer for the colleagues at Protomax is that we, I think, very convincingly could say that we have no intentions whatsoever of, shall we say, restructuring that business. For us, it's a new business in terms of, yes, we kind of like put our toes into it for the first time with FLA with 5 Lakes, and we will integrate 5 Lakes on Protomax, but we actually need the whole capacity there.
And we, I think, could make it very clear to them that if we come together and they will not going to see a restructuring and consolidation of workplaces. But on the contrary, we believe that we can actually open up more markets for them. And that's very, very important actually. We bring to them technology in terms of optics, which is very important for the future development in that market space. But wouldn't the, let's say, Photomax entering Europe be also competent for your own business?
Or where's the additional growth here?
No, no, no.
On the contrary, actually. So what photomax does, like 5 Lakes Automation but just on bigger scales, if you want, They develop and produce and install full lines, if you want, production lines for the OEMs and for Tier 1 providers in the automotive industry. So they're purchasing robots, they're purchasing laser machines, they're purchasing other materials and integrated all together in fully automated production lines. And the more laser based machines they use, the better for us. Obviously, if a customer wants to have another robot, another laser processing unit, another laser from another competitor, fine, that's okay.
But we, shall we say, hope that ProtoMax is able to indicate to their customers that the optic lasers are particularly good. And that's where the unit hazardous energy actually comes from. So the more they sell in Europe and we can open up doors to them to customers. We can help them with addresses and relationship. But then there's another matter.
If ProMax Automation Limited from Barrie, Ontario knocks on the door of, I don't know, Daimler or VW in Germany, the hard sell. If Protomax Automation, a member of the Unoptic group, Marc Zimmer Daimler in Stuttgart or VW in Bospor, then that's another conversation to have. Sure. Okay. Thank you.
And the ability to finance those actually, the ability to finance those is very important for customers as well. Often these projects are prefinanced to only to a certain extent from customers, and the provider and automation provider has to be able to finance actually the work. And we obviously have the financial means to actually do that with our access to capital and stock market and the like.
So with our help, you can even realize bigger projects. Yes,
yes. Okay.
At the moment, there seem to be no further questions. And the follow-up question comes from Craig Adett from Kepler Cheuvreux.
Yes, hi. Again, just one more real quick then, please. On Mobility, I think you've now completed the ProCollect contract. And I just wonder how confident you are in being able to compensate for that non recurrence of sales in the second half of this year?
Greg, I mean, there will be a step down. That's for sure. We can't compensate entirely that big one timer in the second half. So we're not confident. We're actually not going to be able to.
I think that's fair to say.
All right. Okay. All right. Thank
you. Okay. No further questions.
All right. There are no further questions. And thank you very much again for listening and for your attention, for your questions. I'm looking forward to see quite a number of you, I think, tomorrow in Frankfurt on our road show. So in summary, again, we've been pretty pleased with the development of our business in H1.
We're I think, looking forward to hopefully be able to deliver further good news in the remainder of the year. And we're looking pretty confidently actually into H2 And looking forward to seeing some of you tomorrow then. Thank you very much and a very good afternoon.
Thank you.