Welcome to the telephone conference of the OHB SE. On your customer's request, this conference will be recorded. May I now hand you over to Marco Fuchs.
Yes, thank you very much. Good morning here from Bremen. Welcome to our annual report 2019 call. It's very unusual that we are doing this now by a phone conference, because usually this is an event that we traditionally did in Frankfurt in an in-person mode also. This is due to the overall situation with the COVID crisis and the travel restrictions. I hope that you all had an opportunity to download the documents and you had an opportunity to also look at our presentation that has been published this morning. Sorry about the changing the microphone here. I would like to quickly walk you through the presentation, and then we have a Q&A session where we can discuss OHB's annual report and obviously other questions looking in the future.
Starting on page two, just as a reminder, of course, our strategy is still aiming at the full value chain, the development, integration, and testing of satellites. Access to space is an important topic and in-orbit terrestrial service as a third line of activity we are currently building up. Exploitation of data, the usefulness of space is driving the growth of our industry. This is the reason why we have recently announced that we will create a third business line, OHB Digital. Looking to slide three. Last year, 2019's annual report, the numbers that I'm walking you through is still based on the old corporate organization with the two divisions, Space Systems and Aerospace and Industrial Products, because that's the basis of the numbers and consolidation. In the course of this year, we will create the OHB Digital division. Page four, shareholder structure, management unchanged.
Nothing has changed in the course of last year with regard to that, so I can quickly move on. On page five, this is now the slide, the results. If you have seen in our press release, in our annual report early in the morning. The revenues in 2019 came out to EUR 1.03 billion. This is a 3% increase compared to last year. EBITDA rose to Let me check on the press release, EUR 78.3 million, and EBIT was at EUR 49.1 million. The hike in the EBITDA is still related to the introduction in 2019 of the so-called IFRS 16 rules. I'll explain it a little bit. Overall, we are on target. We have guided for the revenues at EUR 1.05 billion.
We were coming out at 1.03. Kurt will explain later on in the Q&A session a few of the details that created this slight difference. Same is with EBITDA and EBIT. We see OHB overall on targets. The guided numbers were about one point something percent, 1.8% higher. Overall, we are happy with the annual report as it came through. What was surprisingly positive is overall that we ended the year with a positive operating cash flow of EUR 23 million. We even achieved an overall free cash flow of EUR 4 million. We were not certain. We were always aiming to a positive operating cash flow. The fact that we also ended up with a positive free cash flow overall is positive, and we are quite happy that that ended up in the last weeks of 2019 in this way. We'll discuss that later.
If we break it down between Space Systems and Aerospace and Industrial Products, the old business divisions, obviously, no surprise, Space Systems did well with EBITDA at EUR 65 and EUR 42. I think I'm now back in the conference call. I'm not aware exactly where the line broke. Maybe I restart with slide five, the development of the financial ratios for the group. Sorry for this interruption, something was wrong currently here with the phone.
The total revenues came out at EUR 1.03 billion compared to EUR 1.0 billion from last year. It's a 3% increase, slightly below the guidance that we had for EUR 1.05 billion. We will talk about that later. It was already when I talked about this a few minutes ago, I was already disconnected. The EBITDA came out at EUR 78 million, and the EBIT at EUR 49 million, also slightly one point something% below.
Overall, we see the company on target. The performance of the company last year was as expected. What is a significant point that was positive is we had a positive operating cash flow in 2019 of EUR 23 million, and we had an overall free cash flow of plus EUR 4 million, which we were not certain to achieve for a long period over the years. We were a bit skeptical on the overall cash flow last year, but it turns out that even the free cash flow was positive and not just the operating cash flow. We will come to that when we ask. Right. Moving on. If we look at the division between Space Systems and Aerospace and Industrial Products, obviously, it's not surprising that Space Systems, with EUR 65 million EBIT and EUR 42 million EBITDA, carried the big part of the results of last year.
Aerospace and Industrial Products with EUR 7 million EBIT and EUR 14 million EBITDA. This is due to the transition at MT Aerospace AG from the Ariane 5 to the Ariane 6 product, which we were talking about many times. Obviously, this will also be visible in this year, 2020, and having an even stronger effect. On page eight, we confirm the guidance for 2020 with total revenues anticipated to be at EUR 1.1 billion and the EBITDA at EUR 80 million, and our EBIT should come out at EUR 44 million that we guided. All these numbers we guided five weeks ago at the Capital Market Day in early February. Obviously, the last five weeks have developed in a way with the uncertainties around the COVID situation.
Overall, of course, it becomes unpredictable how the year will unfold, depending also on how long the special situation that we are all in now will carry on. Of course, being in the space industry with large projects, we are not at risk with regard to the overall contract values, with regards to the top line of our business. The execution, of course, might be under a certain, let's say, delay risk because we are seeing around us, obviously, the first signs in our supply chain, especially actually in the factory in Augsburg and other places where this obviously would suffer if this shutdown scenario goes on well beyond Easter, and we don't know if that will be the case. If it's just a brief incident, of course there will be no major impacts.
If this goes on through the summer, we will see that there might be, obviously, especially in the production part of our business, also some effects. The major difference from the space industry to many other industries is that we are not at risk with regard to the revenues. There might be delays, but it's not a cancellation. The demand is not changing. Of course, I'm sure there will be some related questions coming in the Q&A session. If we look quickly through the numbers in the balance sheet on the asset side, well, not much surprise. I think the major change of the balance sheet, December 31st, 2019 to the previous year is the IFRS 16 changes with leasing contracts being now on balance sheet. That has resulted in the balance sheet to become bigger. That adds about EUR 50 million to EUR 60 million on both sides.
We had a strong cash position at year-end with EUR 85 million. Current assets have increased significantly, mainly because of trade receivables, as you can see here. This has been a continuation of the balance sheet as it was evolving also in the past. On the shareholders' equity side, one major effect is that you see the equity is only slightly increasing because we had a profitable year. We suffered from the provisions for pensions. The provisions for pensions have increased significantly, only because the interest rate is, again, lower than it was in the previous years. You know that this system, obviously, the discount of the pension provision is a significant number for our operations. The other points on the liability side are basically just a continuation of the previous quarterly balance sheets, or actually last year's balance sheet.
Looking at the segments on page 11. Just details what I said earlier that the Aerospace and Industrial Products division had a decrease in revenues and in its profitability. We are more and more basing our success on the Space Systems. This will obviously be the situation until the IFRS 16 transition will be successfully completed. On page 12, you see a number of financial ratios. For the fiscal year 2019, you see the free cash flow, as I mentioned earlier, to be at EUR +4, which during the year and the quarters was quite significantly negative. What this line really shows is how our cash profile over the year worked. We start with a good position and then during the year, over the quarters, it is then acquiring some financing and then at year end, it's recovered. This was the same in 2019.
Yeah, I guess where you see the other numbers, we had a much lower own capital, own work capitalized, which was EUR 17 million in 2018, and it's now EUR 10 million in 2019. A significant decrease there. CapEx was also slightly lower with EUR 21 million instead of EUR 24 million. Something that might be of interest to some of you. On page 13, you see the net debt evolution. The blue columns are the annual ones, and the gray ones are the quarterly ones in between and the evolution during the year 2019. We end the year with EUR 27 million of net debt, excluding the pensions, instead of what you see in the previous year at EUR 7 million and previously EUR 36 million and EUR 37 million. This has been a pretty normal year.
Moving on to slide 14, you see what I said briefly earlier, that own work capitalized is over the last years continuously decreasing from the peak in 2016 with EUR 29 million. It moved down to EUR 19 million and EUR 17 million in the years 2017 and 2018, now at EUR 10 million. This is the intended development. Overall, other CapEx, slightly lower with EUR 21 million compared to the EUR 25 million and EUR 24 million in the years 2017 and 2018.
On page 15, again, the free cash flow, return on capital employed was better in 2019 than it was in 2018. This obviously has to do with the enlarged balance sheet, so there's simply more capital employed, so that the return has decreased. Moving on, the next few slides. 16 shows the headcount, 2,933 total headcount. I think what is significant is that you see the prominence of the Space Systems division is even stronger with 1,980.
The Aerospace and Industrial Products part is significantly smaller. If you look at the geographic footprint, you see that 2,400 people, it's a very strong combination of German operations to about 427, or let's say 530, if you add it all up outside of Germany. We're very much a German-based space system company. The growth in the past years has been very strongly with OHB System. Now I'm turning to the future. The order intake starting at 2017, the history of the backlog, currently at EUR 1.8 billion. The next few slides, I just recap on page 18 and 19, the ESA budgets, the decisions based on the Space19+ conference a couple of months ago in Seville have increased total budget, total funding that is spent by ESA to own budget, EUR 4.8 billion this year, including the income from the European Union, it's EUR 6.68 billion.
That is spent, as you can see on page 19, on a number of domains where we are very strongly represented, especially earth observation, of course, is of high interest, but of course also space transportation and navigation where we have also our share of the business. Overall, coming to the expected order intake, you see on page 20, a number of activities where we expect that this year should have the opportunity of order intake. If you look at that list, Galileo and Copernicus, those are obviously very competitive situations where we need to win contracts against others. It will be very exciting times ahead to see if we are able to be successful on Copernicus and Galileo.
There are a number of other activities like Hera, PLATO, but also Ariane, Share, and also Electra, that is not a competitive defense, and we have already worked on these activities a long time, or we have won competitions like on Hera in the past. This is a continuation of existing work. Those are smaller numbers, but not under competitive pressure. The uncertainty. Institutional commercial customers that we put together in the last line are a number of activities that we are working currently on. Overall, we expect that the conclusion or the summary of this slide, we expect an order intake here in the range of EUR 2 billion. That should give a good basis for future development. On page 21, you see a number of our Copernicus proposals that we have delivered in the past weeks and months.
We are a prime contractor together with Thales Alenia on LSTM, on CO2M, and on CRISTAL. We have a significant role in CHIME for the payload. Still working on one more proposal. Those are now under evaluation. Those four already, and we hope that we will generate a significant share out of that. Just a few more points before we move to Q&A session. On page 22, as recent development. In a couple of weeks, since actually February 18, we have a satellite in French Guiana to be launched on the next Vega launch. It's the ESAIL satellite that we built in our Luxembourg LuxSpace operation. Unfortunately, now due to the corona crisis, the launch that was scheduled for next week has been postponed, so the launch date currently is uncertain.
Obviously this does not economically impact us, it just shows that also the whole space industry is impacted by interruptions or delays coming from the COVID situation. Page 23, an update from other activity. Our MT Mechatronics project in Thailand had a big lift. Big lift is the moment when the reflector is put on the steel substructure. It has taken place recently and just shows that this business is also operating with global customer base moving along and just in the course of restructuring the ground infrastructure activities around this project. The last slide is 24, an update from our Belgian operation, Antwerp Space, has strengthened its position in the navigation market. We acquired from Septentrio, a small GNSS division that has been now completed. We also moved some work following Brexit activities from the payload testing.
The secure testing of the Galileo navigation payload has been moved from our friends and partners at SSTL in the U.K. to Antwerp. That strengthens our Galileo activities there quite significantly. Also, late last year, we have sold a small activity around low margin, around product from Antwerp Space to Sintersa. It has been already reported, this shapes a little bit and I really believe it improves the business portfolio of Antwerp Space. Looking now to our financial calendar ahead, of course, we are in uncertain times, when it says on March 18, we have our analyst conference in Frankfurt am Main, it's not quite true. We're sitting here in Bremen at a phone conference. Obviously, we are not completely sure if our annual general meeting will take place on May 26th here in Bremen as a public event. We'll see.
That will be decided course of the next weeks. We're still aiming for that. What is certain is that on May 12th, we will have the three months quarterly results with our conference call. Of course, the same will be in the later course of the year in August and November. I'm concluding my quick run through the slides. Again, with a thank you that you are spending your time on following OHB today. I would like to open now the session for questions to you. Thank you very much.
Thank you very much. We will now begin the question and answer session. If you would like to ask a question, please press star one on your touchtone telephone. The operator will announce your name when it's your turn to ask a question. In case you wish to cancel your question, please press star two. For your questions, please press star one. The first question comes from Alexander Hauenstein from DZ Bank. Your line is open, Mr. Hauenstein.
Thank you, Alexander. Hello. Can you hear me?
Yeah. Very good. Thank you.
Okay, perfect. Sorry, I missed the first 15 minutes of your call at the beginning. Could you give us a quick feeling where you are currently impacted in terms of your plant activities from the COVID issue? Especially, where do you see the biggest risk regarding your 2020 44 million unit outlook? That would be my first question, please.
Yes, I think the answer is quite easy. The biggest risk is not that we lose contracts or that the demand is changing. It's just that potentially there might be delays occurring around project completion. There might be, let's say if are more severely impacted than they are currently, where we are operating and have a significant home office and have a very flexible response to all these boundary conditions. If this goes on for a very long period, obviously, there is a risk that delivery milestones are not met. This obviously then could result in an impact on the numbers. Currently, we don't foresee this, but on the other hand, we don't know how long these severe restrictions are going on.
At one point in time, especially for our factory operation outlook, that's not the case yet, but at a certain point in time, also the supply chain with material might be impacted, and that would also then have impacts on that side. The summary is, I think our business model, the way we work, and also the activities where we are involved, are not really impacted very strongly by this crisis. Of course, if it takes very long, of course, we cannot assure that there's nothing to be seen. Currently, as I said, there are a few launch delays. I talked about ESAIL. Last week there was an announcement that the ExoMars mission will launch later. This is all after our work. This might change over the next couple of weeks.
Is this an event that will be the case for penalties here, or is that kind of put aside in such a special situation here? Would this be something that needs to be put up in a session at some 60?
Yes. I don't fully understand exactly what you asked, but I understood that you were asking about the contractual consequences, potential penalties, and what that means. That obviously is a big question. The crisis as it unfolds is for us, clearly coming from the direction of a force majeure type story. If launch operations are discontinued or if, for example, test facilities at ESA are potentially impacted, this is something that we believe will be excuses with regard to penalties and other contractual consequences. Of course, on the other hand, if things take longer, that is not to pay penalties, because if you spend more time and more efforts, you have still an impact on the economic results. The overall risk is something that we are currently, like everybody else, is working on.
This is why we are continuing to push the completion and the work on our project. I cannot deny that there are risks if the impact on the operation is more severe than what we see these days. If that intensifies over the next days and weeks, there might be significant delays also in the completion of projects coming. Again, I don't see this in the corner of penalties and these types of contracts, but it is clearly an uncertainty that also impacts our industry that is not impacted in a massive way, but it's obviously part of the overall economy.
I'd like to add. I'd first like to add that discussions have been started with customers already, not only on our initiative, but as well customers, in particular, ESA, has taken initiative to get together with the large LSIs and with Eurospace, the association of the European space industry. As far as we can see it from the very first discussion, this goes beyond acceptance of force majeure. This goes more in the direction of the customer being ready to accept that the current crisis creates some additional cost on supplier side. From the very initial discussions, I can say that there seems to be openness on customer side for some compensation of potential overcosts.
Thank you. That's more we get a little relief, of course, but not additional burdens, potentially. That's the thing.
Yes. Our understanding is the delays and no additional burden, right?
Yeah.
Okay. Thank you. Maybe another question. Could you give us or could you put out the goodwill composition in the balance sheet, please? Perhaps you actually multiply it with the balance sheet. Forgive me, I didn't look at it. Maybe there's a ceiling here where we might calculate some kind of book value calculation or something like that in order to give people a bit of a better feeling where we are in a potential bottom-like scenario.
Yes. I think on the goodwill, which is at a very low level with EUR 7 million, there will be certainly no impairment things. I understand. Your question, if I understand it right, is what is, let's say, the worst-case scenario in the sense of what's the book value, what's the downside? What is the value of the asset value and so on? Again, I think the goodwill is not impacted. We do have, however, capitalized own work in the magnitude of about EUR 110 or EUR 115, whatever the amount was. That is something that goes through an annual impairment review. That would be something that people would look at. Again, looking at a business that is EUR 1.1 billion, the overall amount, if you put it all together, if you look at goodwill, the capitalized own work together, we're at the range of 10% of annual revenues.
That is a comfortable low number. Basically, the overall volume is about EUR 120 million out of EUR 1.1 billion. We feel this is a quite comfortable portion.
Yes. The last question here, how are you progressing most recently with your efforts on the ramp down Ariane 5 and ramp Ariane 6 and the related, let's say, optimization and restructuring measures? Is this progressing or is this also impacted from the recent days, or how do you feel about that? Maybe an update, let's say, what is going on within the last few weeks?
Yes, I guess it is moving along. The ramp down of Ariane 5 simply took place more or less. It's in the last orders that have been accomplished. What is going on in the last weeks is the implementation of the decisions at the ESA conference in November. We are implementing those measures, contracts to improve the Ariane 6, the so-called PHOEBUS, what was called the upper stage, is moving along. Some of these contracts are in the finalization phase. We are reducing workforce, yes. We are negotiating and reducing workforce. I think when you look at the quote, I think this has already been done, right? The contracts, I think it's in the last steps. We are adapting the factory, we're adapting the plant to our overall workload, and it's basically identical to what we discussed in February.
This plan is being implemented. I think this overall corona situation is not impacting that one way or another.
No, in terms of ramp down activities in MP are already established in the budget for 2019 in the form from provisions are made, especially in heavily in Kourou area. The potential provisions already done in 2019. This is one reason for the poor result of the segment in 2019. Another reason for the small forecast in this 2020 in the segment. At the end of the day, reflected in the EUR 44 million guidance for 2020. Not included, obviously, is any implications from the COVID, at the end of the day, this is, as Marco has already mentioned. There will be some implications for sure. We are not in the position now to be exact about that, or happy about that. It also depends on what will happen in the next weeks.
Yes, fully understood. Okay, thank you for that. Okay. Thanks.
The next question is from Adrian from Postbank. Your line's open.
Yes. Hi, everybody. I hope you can hear me well. I know that lines are obviously all really bad due to traffic, I think. I keep trying. First, one question. First of all, as you were referring to the supply chain in Augsburg, I was just wondering whether you see any issues upcoming also for the satellite production, or is the inventory that you currently have sufficient for a decent production to be kept up over the next couple of months? A question related to corona. Could you remind us actually, in the financial crisis, whether you did see some project push out from a budget perspective, or has that not taken place at that time? That would be helpful. Then I have probably some housekeeping follow-up questions.
Yes. The last point you were mentioning, it was actually more the opposite, because during the crisis, the government spending, the overall investment in technology and useful infrastructure was even increased as part of the, let's say, the measures to keep the economy going. In that respect, I do not foresee that overall spending will go down. It's probably more a selective issue where the money will be spent, and obviously, there's places to explain why it's a useful activity and what the benefits to the society are. Overall, no, I do not expect that this will be cut down. In terms of the supply chain for satellites, currently, we don't foresee any significant points, but what is more critical is, for example, going to test houses and doing the external testing, this might be impacted. Maybe some logistics are impacted. Launches might be delayed.
There is an overall delay risk coming, but it's not that. The optimization of the supply chain in our industry is far less time-critical than you have it in other industries. Other industries are doing this with daily stuff because they have a lot of work in progress and a lot of material that they want to optimize and not sit on their own books and in their own factory. That's not the case with us. Our stuff sits here for months before we install it sometimes. We have a very different risk assessment on the optimization of balance sheet and risks and current assets. In this respect now we're lucky because it doesn't backfire on us. That's not really the issue. The other hand, it's just one little thing is missing, and satellites will also as planned still.
Again, we are not working on stuff in a daily production, but in a multi-year project mode. It's not that critical than you see with many, many other industries.
I agree. Actually, on the financial result in Q4, that has been pretty high. At the same time, minorities, obviously due to the lower income from MT Aerospace, have been low. I was wondering, first of all, what's the background and if there's some link between those two items and on Aerospace and Industrial Products in general, the EBIT has been slightly negative in Q4 already. I was just wondering whether it was already below your original expectation or is that more or less as you thought it would turn out to be?
Financial result is poor, mainly due to the fact that we have this equity result of minus EUR 3.7 billion. This comes from our minority participation in Aerotech Peissenberg. They really had a poor result in 2019. That's the main reason for the comparable, worse financial result in Q4. This is a big impact at the end of the day, very simple. What happened in the segments Aerospace and Industrial Products in Q4 or in total year 2019, 2020 was more or less in line with our expectations for this year. You see particularly in the segment reporting that we have a really good result in the main segment Space Systems, with good increase of the EBIT amount, and you see also the substantial decrease of the EBIT result in Aerospace and Industrial Products. This was more or less expected.
The result from MT Aerospace itself, stand alone in our book, was not worse than expected.
What is really important is to understand that our Aerotech Peissenberg participation, which is around 30%, was significantly impacted by the restructuring program that is going on there. There have been reserves created at ATP for the restructuring, head reduction. That came as a little surprise for us because, again, it's not part of the consolidation perimeter, and it was more intense, so the result was more negative than what we expected in the fall of 2019. That surprised us, this result.
They have built up these provisions in Q4.
Yes. That result in the financial result that you see in overall. It had overall also an impact where there was some downgrading on some open loans between MT and ATP that impacted significantly. That was one of the major effects that came in during the, actually the last couple of weeks, the negative impact.
Yeah.
Actually, even after the Capital Market Day, actually, we didn't know fully at the Capital Market Day how intense the restructuring is. The bottom line at ATP's restructuring is that, of course, with every restructuring, you put the burden into the past and then you hope to improve in the ongoing year.
Yeah. Okay. A few questions then. Well, first of all, what's become at Aerotech Peissenberg and what do you think, hugely, about it going forward? Secondly, on the group cash flow, both operating and free cash. Let's leave out Corona because obviously we don't know how that unfolds over the year. On a current basis, what you can see, what do we think of operating and free cash flow for this year?
Yeah, that's a good question. I'm not so sure if we can leave out COVID from this forever, but I guess the overall cash flow situation is what you see basically on slide 13. That over the year, three months, six months, nine months, obviously, the depth was much, much higher. Always at year-end, as you can see at the year-end of 2019, 2018, 2017, significantly lower. Obviously this cycle, the curve will be similar. Where it will end in nine months, in 10 months, not completely predictable. Actually, honestly, I was personally quite positively surprised that we had a positive operating cash flow of more than EUR 20 million, and that the free cash flow also was positive. If you remember carefully, we never announced that there will be a positive free cash flow. We always said there will be a positive operating cash flow.
There was also a positive free cash flow, something that we were not completely sure in the course of last fall, and it turned out to play out well. What I'm trying to say is that you always have this uncertainty. The overall year 2020 will be difficult in terms of cash. Now, if you ask me now, I cannot put aside Corona, and including Corona, I think it will be difficult. I don't know, Kurt, what is your-.
I agree. At the end of the day, 2019, the cash result was really better than expected. Positive free cash flow, we never have expected that. For 2020, the forecast without COVID was also critical concerning to achieve positive operational cash flow. Now, within
The effects of COVID is really not seriously predictable for us.
It's not even necessarily negative because this COVID thing will start a number of changes. Because we are working substantially for institutional government-related customers. There might even be that there are compensation measures. I'm not even sure that this is all negative, negative, but it's uncertain. This is what it really comes down to. There are packages prepared that advance payments, partial payments, and so on and so on and so on. The overall institutional system will react to the crisis in a more forthcoming, comforting way. This might even be better than you think. Currently, as we speak today, March 18, obviously, we are really not sure.
Yeah. It's completely right. It doesn't mean that it's worse than expected, but it's unclear. It's very simple, unclear.
All right. Aerotech Peissenberg, what is any additional remaining risk? Yeah. Thank you.
I think Aerotech Peissenberg went through a restructuring in last year. If you remember, and you are following OHB since a couple of years, this was five, six years ago, when we moved into a minority position. The bottom line of Aerotech Peissenberg is obviously it is attached to the aero-engine business cycles. That's also an industry that is in a difficult situation currently because the whole airlines are suffering. The aero-engines are still doing okay, but obviously, it's impacted by the overall uncertainty coming from the 737 MAX situation. My bottom line is, we have moved into a minority position because we regarded it six years ago as non-strategic. That has not changed yet. That's still the judgment. It's a non-strategic minority participation. I'm not so sure what to do with it long term.
I think now the restructuring should result in a better outcome for 2020, 2021. It's not core business for the OHB group. This might change if the industry changes. I unfortunately, I'm really unable to foresee the aero-engine or the aeronautical business. I think putting it all together, also the changing in the travel habits that we would maybe see as something forthcoming. Traveling is changing dramatically. Our company doesn't travel at all. I'm sure that many companies don't travel at all. I mean, all the airlines are basically shutting down. What does that mean for a supplier into aero-engines? My concern is if less aircraft fly less hours, there will be less engine parts, maybe. I don't know. This is just a momentary glimpse. I don't know. Lutz, if you have an idea on where you see the aero-engine industry going?
As unsure as you are, I would say. For sure, at a certain time, air traffic will return. For the time being, the combination of traffic being down, less new engines will be taken. We still have the 737 case. The delivery rates of Airbus and Boeing for other aircraft types will go down. It's certainly a good time for maintenance because old engines will be used longer. If aircraft don't fly, your maintenance effort is very much reduced as well. It's difficult to predict at the moment.
We're happy that it's not strategic. We are happy that it is not our core business.
Yeah. If we were the executive board of Rolls-Royce or so, we would have more headaches than we have at the moment.
Yeah. Fully agree. Sorry, just last question on that topic. Do I understand that you more or less have written off the asset completely then? Is there some remaining book value to be written off as a potential risk going forward?
I think currently the book value, I mean, the equity balance sheet recognition is zero.
Yeah. Is zero. Okay.
Upside.
Yeah, potential upside. You're right. Yeah.
Yeah, I think isn't that the case? Yeah.
Thanks for saying just a couple of years. It makes me feel younger a little bit. Actually, I think I'm following the company for 16 years with probably six to seven years interruption. Anyway, I wish you all the best in COVID, thanks for answering the question.
Thank you.
Thank you.
Yeah. Many other questions? We still have a few questions.
Yes. The next question is from Jasko Terzic from Bankhaus Lampe. The question, please.
Yes. Thank you. My first question is again on Aerotech Peissenberg. Do you think those restriction measures are enough, or is there the risk that we in the running fiscal year 2020 also face a potential significant negative contribution?
No. First of all, I think it is enough because it is a plan, I'm certain, has been already agreed with the German Government and so on. There is a so-called, again, an additional tariff agreement implemented. It will not have any impact on the OHB balance sheet because it's an equity and the equity is already written off. That equity participation at EUR valuation. There will be no impact coming from that.
Okay, thank you.
There will be no negative impact coming. Obviously, if there's a positive development, there's an upside.
Okay. Thank you. Understood. On your Italian production in Milan, any update here how it is progressing until recently?
Yes, of course, Milan is, of course, our most difficult location. It's a location of about 200 people, really in the city of Milan, in the heart of the crisis area in Lombardia, and they have a very reduced operation. There are people at the company, a massive home office operation going on. Many people have been sent home with work. Some people are at home not working. Management is there every day. I'm having a daily call with Roberto Acetti, but I can only say it's a very intensive process there, much more than on our German side. The number of people in the company is percentage-wise lower, but it's still operating. There's no restriction that you operate a company. I'm hearing from Roberto, in Lombardia, they even stopped testing COVID people that are not having obvious sickness signs.
When I ask him, "Do we have COVID cases in the company?" He said, "I don't know." It's a different level of crisis in Lombardia than we have in other operations. This will be something to follow. On the good side, obviously, this will also be the side where you see changes moving first. If Lombardia moves out of the crisis, then we can anticipate Germany will also move out of the crisis according to those things. It's difficult in Milan.
Okay, thank you. Maybe could you help us out? I guess you've run a scenario calculation. Could you give us an indication as to what level of sales decline, just hypothetically, you would still be break even? Is there a figure you can share with us?
I don't have that figure, no. I think this is a figure. We have never calculated that figure. I do not expect that much of a sales decrease. I think that, again, all our contracts, our top line is robust. We have no cancellations. We have no, let's say, disappearing demands.
It can only be that turnover is moving from 2020 to 2021 due to schedule related programs. That is possible, but it's not possible to make a forecast up to now how much it will be or something like this. Up to now, we have no reason to not confirm our guidance.
Okay.
Remind you what we discussed earlier, we have basically no goodwill in the balance sheet, so there will be no extra write-offs from that side. Again, there might obviously impact, but overall, our balance sheet, our business model, and our customer structure makes us more robust in this crisis than most others.
There could be the risk that there will be a significant reduction in activity in Bremen, for instance, which then, of course, will have some impact on the EBIT, right?
Yes. I mean, at one point it might be the case.
Yeah, it can be, but I'm not so sure about that. I'm really not so sure about that. Nobody knows what in the next weeks will happen. There will be for sure some delays in our supply chain. That will be for sure the case that we will achieve at a later point of time some major milestones. Maybe. It's not correct to say today this will have a significant impact on our EBIT. For sure, we cannot say that. Very simple.
Okay.
Just particularly because customers seem to show flexibility to recognize milestones even under other conditions than they were originally foreseen in the contracts. I mean, our customers are governmental customers, and European governments at the moment do everything, as you can see, they do everything to support industry. Of course, it's not only by the government themselves, but by government agencies and entities and their behavior. They obviously have got clear instructions as well to behave in a flexible way and support the greater industry. From the very first talks, which have happened in the last two weeks, I would say, we see clearly an openness and even an initiative on customer side to come up with schemes which will support industry in suffering not significantly from the current crisis.
It's comparable. I mean, if you would like to compare to 2008 financial crisis, in 2008, there was really no impact on OHB System of the financial crisis. No impact in terms of turnover and on profitability. Maybe here another case, I would not say that for in any case we will achieve this guidance. Up to now, it's not fair to say, to make an assumption that these figures will be reduced for a certain number. We cannot do that. We cannot do that.
Okay, understood. Maybe one final one on a scenario type of question. When we assume that you have an interruption in Bremen of four to eight weeks. What will it represent in your sales as a delay for the running fiscal year into the next year? Just as a rough figure.
Again, we will not communicate anything about this today. We cannot do it. It's not fair to do it, I think. We cannot expect, and we have not in our forecast a delay of four to eight weeks or stop of business if for four to eight weeks or not. We can talk about that if it is the case, but as of now, we will not talk about it yet, and we are not prepared to talk about that.
Our business model, as you know, is projects. We have people working, hours booked. Obviously, it's very simple. If one month is one-twelfth of a year, you have to take out the materials and stuff, so you basically can make your calculations around that. We are not going into a situation where there's nobody working. We are distributed over Germany, we're distributed over Europe, there will be certainly operations at a certain level going on. For example, when we now look at where we are operating now, we have the majority of the people are working in the factory, and a big part of the people will always work in home office. There are many activities here for engineers that do software writing, that do report reviews, that do work on computers, that will continue to work no matter what.
The percentage of people that really stand in the integration facilities working on satellites is minor, very minor. The productive process of OHB, mainly in the satellite domain in OHB System, is engineers sitting in front of a computer and working on things, as I said, either doing design, reviewing engineering work or working on documents. This will go on. This will definitely go on. We have quite positive experience with home office. It's partially even the case that people in home office are even more productive than at the company, because there's less interruption. What is very important for us is to keep the IT network running. That's a core interest we have all. Even with limitations on the IT network, work can be done in a decentralized way. Again, we are an engineering company that will not simply stop like a production facility.
Of course, outcome will be different, but the fact that the engineering teams will go on will slow that down. Again, I think it all depends how this crisis will evolve. If there is a more severe crisis that goes on for, I don't know, eight months, of course, there is a different impact than when it goes on for four weeks. Yes.
Okay. Further questions?
Yes. Next question is from Zafer Rüzgar from Pareto Securities. Your question, please.
Yes, good morning. Hi, thank you for taking my questions. Three questions just from my side. First, yes, I understand that it's not easy to quantify the possible impact of coronavirus, when do you expect to see the initial impact on your P&L? Would you or can you confirm that Q1 so far is a rather normal quarter, Q1 2020? Two questions related to the financials, maybe to Kurt Melching. First, maybe I missed it, can you summarize the reasons for the slight miss of your guidance 2019? Finally, related to your guidance 2020, maybe you can provide some breakdown on segment level, the expectations for 2020. Thank you.
Yes. Maybe I start. Overall, obviously, 1st quarter almost being completed. We do not expect any major surprises on Q1. Obviously, moving on, this depends on how April unfolds. Kurt, do you want to take the question on the detailed breakdown?
Yeah, for the guidance, EUR 40 million EBIT. We have a situation that share of Aerospace and Industrial Products, this is around EUR five, six million roughly, the rest coming from Space Systems.
Okay. The miss of the 2019 guidance? The reasons.
I wouldn't call it a miss. This is one point something%. This has taken place mainly when, let's say in the auditings, a conservative look has been done on the intercompany with ATP, where there has been a write-off or a conservative judgment on the intercompany loan. There have been a couple of smaller items here and there, a couple of EUR 100,000 here and there.
Overall, we are at EUR 49.1 million. Of course, yes, we expected to be at EUR 50 million. I guess this has been evolving over the last years. You have to understand also the overall view on auditing, of course, in the last days and weeks with regard to provision taking and sufficiency of provisions is more conservative, anticipating already the atmosphere of the year that is unfolding. There has been a slight lower total revenues with EUR 1.03 instead of the guided EUR 1.05.
That has to do basically with revenue recognition in last year of subcontracts that didn't take place in the way as it was looking even at the beginning of this year. The bottom line of our view on that is that we see this to be on target since it's all less than 2% deviation, which I think for the current economy condition is on plan scenario.
Okay, fine. Thank you.
Further questions?
No, there are no further questions.
Good. I would like to thank you all for your time, for your attention. Of course, during these times, I appreciate very much that you're spending your time with OHB. We will certainly hear again on May 12th after Q1 results will be the same format. You're obviously all invited to that. If you have any questions, of course, you're free to call Martina or Kurt or any of our teams here. I wish you a good week, and I hope that we stay in close contact also in the coming weeks. Thank you very much. Best regards. Thanks from Bremen. Bye-bye.
We want to thank to Mr. Fuchs and all the participants of this conference. Goodbye.