Ladies and gentlemen, welcome to the earnings call financial year 2019. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulty seeing the conference, please press star key followed by zero on your telephone for operator assistance. May I now hand you over to Jessica Albert, who will lead you through this conference. Please, go ahead.
Good afternoon, everyone, welcome to our earnings call for the full year 2019. On our call today, our CFO, Mark Friedrich, and our CIO, Johannes Laumann, will present you the financial results of 2019. After the presentation, we are happy to answer your questions. The presentation shown is available on our website. Before I start, I would like to remind you that this call and presentation contains forward-looking statements, including projections which may not develop as we currently expect. I therefore kindly ask you to take note of the precautionary warning about forward-looking statements that is included in the materials on our website. Let me hand over to Johannes Laumann.
Good afternoon, everybody, and welcome to our presentation today. Before we will go into details of our financial year-end results 2019, presented by my colleague Mark Friedrich, I would like to give you a short insight to our business 2019 and to our changes we have also done in the previous year. Basically, when we talk about our business model, we aim for a maximum value creation. This is created by four steps where we decided to go into a risk position because we understand the risk we purchase. Secondly, we request the seller to fund the business for us. With our operational experience, with a consulting team of roughly 60 people, we will go into full responsibility and try to manage the situation and further improve the business.
Last but not least, at a certain point of time after restructuring of the business, we shall look into further development of the business or have a structured way of exit the business. We, as management, are very much convinced in our business model, which you also see on the shareholder structure, where more than 40% of the shares are in hand still of the management team. A quick intro and in a nutshell, because I guess most of you have already listened to the presentations of Mutares. We divide our model into and break down into the four sectors, coming from the four phases talked about in the previous slide. I would like to give you that with an example. In end of 2017, we bought Donges Group.
Donges SteelTec was roughly EUR 40 million in sales, slightly below our target to acquire companies between EUR 50 million and EUR 500 million in sales. We did the turnaround with our operational team and conducted consulting fees and net proceeds, which are very important pillars of the profitability of Mutares holding. Then slowly but surely, we added companies anorganically, like Kalzip FDT and a larger footprint in the Nordic, following our buy and build strategy. Those buy and build strategy can consist of dowry deals, but can also consist of equity deals. This is what we have followed with the Donges Group. Three steps of the Donges Group are completed. This business model and this three-step approach has brought roughly EUR 90 million in cash in the last five years to the Mutares holding level, which a significant amount of that was dividended to our shareholders.
We have grown in 2019, and we have already started the further growth in 2020. We now have six offices. Last year, we opened in the Nordic after the acquisition of the company. In April, so a few days ago, we opened a facility in Frankfurt. 2019, some figures, we saw more than 4,000 opportunities throughout all our offices, and we have targeted 10 acquisitions at the end of the year. With those 10 acquisitions, we grew at close to EUR 1 billion in sales, in 2019, and it was on the acquisition side, the most successful year of Mutares history ever. When you look at our portfolio and what is our main measurement also looking forward is the return on invested capital. When we look at our vintage portfolio, the vintage portfolio so far has contributed a 5.6 return on invested capital.
For the whole portfolio existing, including potential exit proceeds, we look on the return on invested capital between five and 10. This is for us going forward also a very important measure of success of our business model and of what we do. In 2019, consolidated, we have achieved more than EUR 1 billion in sales, which is an increase of roughly EUR 150 million. Of course, driven by our acquisitions we have conducted in 2019. Adjusted EBITDA grew, cash and cash equivalents slightly decreased, so did the equity ratio. Mark Friedrich will, in the future slides, also speak about that much more in detail. Let me take the major developments and then give you a quick last insight on the 10 acquisitions we did in 2019 and the ones we have already done in 2020. The 10 transactions in 2019 were on buy and build and platform acquisitions.
We did also, with our consulting team, great success stories in the development of the Donges Group. We realized the first synergies. The day before, we received another EUR 25 million order for Donges on a large bridge project, and we are currently quoting on similar size projects in Germany and in the Nordics. Balcke-Dürr did a successful separation of their Rothemühle business, which we separated from the core Balcke-Dürr heat exchanger business, and which is quite profitable and on the harvesting side of our life cycle. Elastomer Group delivering, again, sustainability results after a quite challenging year 2018, and had a great development in terms of sales, but especially also in terms of coming back to a more or less market outperforming profitability on EBITDA level.
Our adjusted EBITDA solidly increased, which is mainly driven by the engineering and technology there in the words of also Gemini, which is an important measurement there, and the Elastomer Group, as said before. Again, as you could see out of the press release, the dividend which we have proposed is EUR 1 per share, identical to the year before, coming from our successful 2019, coming from the consulting fees plus the dividends of the successful development of our companies. 10 acquisitions 2019. I will guide you through very quickly because the last times you also had questions on the portfolios as such. We did significant development of the Donges Group, Normek, FDT, and Ruukki. Ruukki is still under merger control. However, we have a strong belief that we can expect the closing by end of this month. We bought TréfilUnion and Plati.
We bought, as platform, the keeeper Group, where we add already a massive tissue business close to Cologne, producing napkins, which are also technically able to produce toilet paper and similar products, which at least for the German-based listeners of this call, toilet paper was perceived a little bit as gold in the last couple of weeks here in the country. We bought KICO. The largest transaction, 2019, was BEXity, which we bought from the Austrian Railway Company. 2020, we already had two acquisitions, Loterios, as in strategic add-on for Balcke-Dürr to strengthen product portfolio and geographic footprint in Italy. Nexive, which is the postal service provider, the number 2 in the Italian market, and we expect the closing here by summer of this year.
This was it from the acquisition side, and I would like to hand over for the financial deep dive to Mark Friedrich, our CFO.
Thanks, Johannes. I start on slide 13 with an overview of the P&L. As Johannes already mentioned, our P&L is mainly driven by the acquisitions that we did in 2019. You see here that we are slightly above EUR 1 billion, and we are quite proud of it because we kind of forecasted it during the year to go above EUR 1 billion, and we finally reached it. It's an increase of 17%. Normally, you would expect that pretty much all expense line also increases when the portfolio increases. You see that it's true, except for the other expenses, which slightly decrease, and that's mainly due to the IFRS 16 effect, which is approximately EUR 20 million in 2019, which is moving from other expenses to depreciation and interest expense.
We ended the fiscal year with approximately EUR 80 million in EBITDA, mainly due to the bargain purchase income, which we will see on the next page, and ended the fiscal year with an Adjusted EBITDA of 7.5%. On a run rate basis, including the acquisitions that Johannes just mentioned, we already did in 2020 together with the ones we closed in the Q1. We expect sales level in 2020 to be somewhere around EUR 1.5 billion.
On page 14, we have here the split of the Adjusted EBITDA. You see that the main income comes from bargain purchase, which is related to the transactions we did, mainly TréfilUnion, KICO, and BEXity. On the other end, we started the restructuring in most of these acquired entities already in 2019 and had one-off expenses, especially for social plans of EUR 70 million, but also other restructuring and consulting expenses of approximately EUR 5 million.
That's mainly due to the add-on acquisitions we did, so where we have some special consulting, that we need to close these transactions. In 2019, we had no deconsolidation. We believe that this will be differently in 2020, but 2019, we had none, so therefore, this is zero. On page 15, balance sheet, again, increased in terms of total assets. We reached approximately EUR 850. Half of the increase is due to IFRS 16, where you can see on the asset side, in the non-current assets, the right-of-use assets with approximately EUR 120 million, which is the effect that we pretty much have no off-balance leasing anymore. Therefore, we have the right of use, and that is then depreciated over time. On the other hand, we have also the liability in non-current and current, which is pretty much the same size. The equity ratio dropped from 31% to 24.5%.
This is also due to the IFRS 16, which accounts for approximately 4 percentage points and on the other hand, the increase in total assets. Coming to the segment financials on page 16. Starting with automotive and mobility, which is clearly the segment which is highly impacted by corona in 2020. Not all of the companies have the same effect. STS and KICO are the ones which had, with the STS, a good year, 2019, at least the second part of the year. KICO started the restructuring in 2019 and could fulfill two major steps out of four. These two companies are looking forward to a challenging year 2020 with the plants closed in Europe.
On the other hand, we have Elastomer Solutions, where we already heard that the company really strongly recovered from 2018 and came back to a profitability level, in the double-digit numbers in terms of EBITDA. Together with Plati, this company was actually producing until last week. This is a very good sign that we see that our portfolio strategy really kicks in here, that we have companies that deliver all over the world. These companies deliver, for example, to Asia, where the economy is already recovering. Also, Plati, for example, delivers only 50% into the automotive sector and the other 50% into, for example, the healthcare business. Coming to engineering and technology, which is the strongest or biggest segment in terms of sales in 2019 and probably also for the year 2020.
We saw Donges Group. Johannes already explained it all the time and in the calls during 2019, and already mentioned again that we looking forward to the closure of the add-on acquisition called Ruukki by the end of the month, which will significantly impact Donges Group positively, we believe, and we already prepare with the team the takeover. On the other hand, we have Gemini in this segment, which contributed quite positively since the company and the team was able to execute the restructuring plan on time, by closing one site and reducing the costs and increasing the efficiencies in the processes of the two other sites. The company is looking forward to a quite good year 2020. Coming to page 17 to the segment goods and services, where we see most of the acquisitions, with TréfilUnion, KICO and BEXity.
Also, for example, the acquisition of Nexive will be part of the goods and services segment. Revenue, therefore, increased quite significantly, and BEXity was not even contributing to that sales level since we acquired the company at the end of 2019. In this segment, we saw that KICO or that the acquisition of KICO can be quite fruitful for the group. The company was able to accomplish major steps of the restructuring plan, already in 2019, and is looking forward to a positive year in 2020. Sempertrans, it looks like that Sempertrans is undergoing the same as Elastomer did in 2018 and 2019. It was quite a challenging year, 2019, after a very good year 2018. Now we see that the company is recovering quite well in 2020. We believe that the company can come back on track to a very positive level in 2020.
Coming to slide 18, which we consider as quite an important slide, that should give you also some more transparency and some guidance how we view our business model. You see here the three phases that Johannes already mentioned, realignment, optimization, and harvesting, that portfolio companies normally undergo when they are part of the Mutares Group. In the realignment phase, we execute our restructuring plan, therefore, you see here the six platform investments, including BEXity and PrimoTECS, that we currently have in the portfolio. It is also, for us, totally normal that this is negatively contributing to the adjusted EBITDA in 2019 with approximately EUR 14 million. This company must be always red, there must be always a certain number of portfolio companies in that phase due to our goal to have a well-diversified portfolio.
The number must be right, since we acquire the right targets for our business model. Companies should normally move on to the optimization phase. In the optimization phase, we target to enhance the profitability after we have completed the first social plan, after we have probably closed the site or removed machines from one plant to the other. We look for a second wave, cost efficiency program. We look to find the right people into the right positions, and we also look for add-on acquisitions. Normally, the companies from the realignment phase should move on to the optimization phase after nine months-18 months. In the optimization phase, the company should have at least a break-even Adjusted EBITDA, which we also see here. Gemini contributed quite positively.
Donges Group, with the add-on acquisitions, contributed actually negatively to it, which is also quite normal when we acquire add-on acquisitions that are loss-making. The final phase in our business model is the harvesting phase. In the harvesting phase, we normally expect that the companies contribute dividends to the holding or where we target for an exit. In this phase, the Adjusted EBITDA must be positive and must be sustainable positive. This slide should give you a good guidance what we actually have in mind for 2020, for 2021, and should give you some more transparency about the cumulated Adjusted EBITDA of only EUR 7 million, which is quite differently along the phases, which is quite normal in our business model. On the last slide, coming to the outlook.
2020 will be a year that is impacted heavily by the coronavirus pandemic, but we expect that the M&A activity will kick up again in the second half of 2020. We still look at transaction or potential transactions also this time of the year, but we believe that the M&A activity will increase significantly in the second half of the year. We already did two transactions in 2020, where one could be already closed and the other one will be closing end of Q1, probably also Q3. Together with the acquisitions that we still have to close and the acquisitions that we expect in the second half of the year, we believe that we have revenues in the group in the fiscal year 2020 of more than EUR 1.5 billion.
This all should contribute to the final goal that we want to sustain our dividend capacity and our attractive dividend policy of at least EUR 1 for the next years. With this, I hand over back to the moderator.
Ladies and gentlemen, if you would like to ask a question via the telephone lines, please press zero and one on your telephone keypad. Once your name has been announced, you can ask your question. If you find your question is answered before it is your turn to speak, you can dial zero and two to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment please for the first question. The first question is from Alina Köhler, Hauck & Aufhäuser. Your line is now open.
Yeah. Hi there. Good afternoon. I actually have two questions. I realized that you didn't report net asset value this time, but rather focused on return on invested capital. Are we going to see any more changes in regards to investor communication, or what's your general strategy there?
I think we will asset before.
One of our key measurements is return on invested capital, rather than the NAV. We will also come out with a more detailed description of that in the following weeks. I think our main focus is the creation of value for our investors, which we have done significantly in 2019, which you also see with our dividend policy, which is stable and with a potential upside also over the next years. Secondly, I think it's important that we follow the growth path because the overall sales and the creation of value in comparison to sales is one of our main targets also for the upcoming years.
Okay, thank you. My second question would be, could you provide a little bit more color on the coronavirus and the impact on the portfolio companies? What companies should be hit the hardest and, for example, STS comes to my mind there. What is the future going to look like and what is Mutares going to do?
I start, and Johannes will add. First point that we actually want to highlight is that not all portfolio companies are hit hard by the coronavirus. We also have companies that kind of profit from the coronavirus. For example, Sempertrans, where all main competitors are in Italy, and therefore they have kind of a free road. On the other end, you already mentioned correctly that the hardest hit industry currently is the automotive industry. What we believe is that we will ramp up the business after the shutdown, so we will start, and that's current status of the OEMs, by the end of April and then ramp up the business during the Q2. We also have, through STS, we have plants in China. We heard this morning in the call from the STS management that the Chinese plants already are close to 100% production level again.
We believe that this could also be same road for other parts of the world to follow that way and to see that kind of recovery. We, as Mutares management, have already reacted to that pandemic by implementing pretty much a project office where the board is part of, and we have separated the portfolio companies or allocated the portfolio companies to each of the board members. Everybody follows closely on a daily basis the liquidity level, the measures or countermeasures they take, the production level, absenteeism rates, or things like a corona case. We currently have no one in the Mutares holding that mentioned that case, so we are quite lucky so far. We have sent pretty much everybody into home office. We can really work quite well for a couple of weeks together just by phone and laptop.
We already addressed the problem, and we believe that we have to refocus already again, and that's what we also did with the consulting team already to prepare the ramp-up. That is going to be also challenging for us and for our suppliers and customers to increase now the production again. We look for smart ways to have the right resources at the right time in the production at the right shifts.
Yeah, maybe I can add two examples which Mark was mentioning and one I was flagging earlier. For example, a company like the Donges Group, which is, let's say, a large and heavy asset in our portfolio. The construction industry is still doing okay. We received large orders. There's, as we speak, no short-time work in the whole entire group. They're not impacted by this so heavily. On the other hand, I think it's now more for us. We made sure in the last weeks that we kept the liquidity in the portfolios together, but it's now the time rather to think about the ramp-up and how it goes forward.
I think even in the automotive sector, if we take some of our companies which are not so long in the portfolio, and based on the business model I've explained to you in the very beginning, it's I think a very nice situation also to come out of this situation with a very strong cash balance and with a very strong cash on hand. You can make the difference there as well, and we see quite also potential here to have the companies which come out of this crisis with a strong cash position to use this as a great opportunity to outperform market, get more orders in, and make the company much better than it is today. Last but not least, of course, no one could expect that we acquired, as I said before, for KICO, and I explained that the toilet papers thing.
The acquisition of the add-on for keeeper was at the right time. We produce now parts of toilet paper, we produce masks there, and they're all able to do that. This was, so to say, a little bit a lucky shot then, that this is a great upside on a great company. We were very much convinced about the business, and now if you could say that we had the lack of the need of these products which they make, which speeds up a lot our measurements and restructuring plan we had initially.
All right. Thank you very much.
The next question is from Holger Steffen, SMC Research. Your line is now open.
Good afternoon, all together. I have a couple of questions. The first one is an additional question about STS Group and other companies. In your annual report, you've mentioned that especially STS and KICO need additional financing to manage the crisis. Do you see both companies as candidates for public help? Which other companies of your portfolio may use public finance programs?
Correct. Those are candidates for public help, but I explained what we did in terms of project management and the situation with the board, and one of the goals to implement it on a board level was to share the informations that we actually gain in the different countries and to make sure that every portfolio company is trying to get the maximum of public help they could get. The easy form is to go on short-time work, but also to obviously apply for every program that they are eligible for. That is not narrow to companies that potentially need it. It's more like we consider every company to be affected by the coronavirus pandemic, and therefore, every company has to do as much as possible in the current situation in terms of saving liquidity and trying to get access to an official program.
Okay, fine. You expect now to finish the still pending Ruukki transaction by the end of April. What is the basis for this assessment?
The confirmation of the merger control authorities in Finland.
Okay. It's still working.
Very simple.
Okay. In 2019, the depreciation in the group increases significantly to EUR 53 million, partly due to IFRS 16. Can you give us a short note about the main effects and your expectation for 2020?
The effect of IFRS 16 in the depreciation is EUR 16 million. I think the level in 2018 was something like EUR 30 million. Approximately, 80% of the increase is due to IFRS 16, and the rest is due to the increasing portfolio.
Do you expect the same level in 2020?
I expect even more. For example, Ruukki owns every location they have, so therefore I would expect that the depreciation level substantially increases.
Okay. It depends on the coming acquisitions, right?
Yep.
Okay.
And exit.
Exit. We will come to exits later. You've mentioned Balcke-Dürr Rothemühle, which was separated from Balcke-Dürr, as an attractive growth story. What are the perspectives in the actual environment in 2020? Is the business stable growing, or what can we expect here?
The business is as expected. There is a portion in Poland and a portion in a company in Germany, but which acts internationally. What we saw in Q1 is more or less stable. Poland is a little bit up, and the German entity a little bit below plan. On average, we don't see that significant impact. It's also project-driven business, which is not reacting in weeks. For 2020, I see a certain stability in this business, and I don't see too much trouble or pain in that, rather light and fun.
Okay. We didn't speak about the holding P&L until now. Maybe you can give us some short comments about the revenues and the soft costs of the holding in 2019 and your expectation for 2020.
The holding sales level increased to approximately EUR 20 million from EUR 10 million. That's partly due to change in the way we send invoices. That is all coming now from the Mutares and not anymore from the country Mutares entities. On the other end, it's clearly EUR 5 million that we have in new sales that is due to the acquisitions. Therefore, we have in the report that we published this morning, you see a slide with the number of employees that the group has, but also a number of employees Mutares has, and you see a significant increase here. That's quite important for us since we want to grow the portfolio like you heard from Johannes, and we believe that we can do it in 2020 again. We believe that the sales level will substantially be above EUR 20 million in 2020.
On the other hand, you also see that our business model relies on income from our participations, and we believe that this is going to be again the case in 2020, where we will have an income from dividends, but hopefully also from exits.
Okay. You are still planning exits in 2020, even in this environment?
Yes, we do.
Okay. Last question, you didn't publish the annual report of the holding company stand alone. Is this a plan for the near future?
No, we will publish it together with the invitation to the annual shareholder meeting, which will be digital this year. Fully digital.
Okay. When do you think this will happen?
Thursday.
Okay. Thank you very much.
Keine?
So far we have no further questions. As a reminder, if you would like to ask a question, please press zero and one on your telephone keypad. The next question is from Tim Schuldt, Pareto Securities. Your line's now open.
Yes, thank you very much. Actually, I have two remaining questions. First one, could you give us the cash level on holding company level end of the year? That would be one. Secondly, could you elaborate a bit in more detail why in the current situation, which is characterized by a lot of uncertainty, you have actually decided to keep the dividend at the EUR 1 level? Thank you.
First question, holding cash at the end of 2019 was approximately EUR 10 million.
On the dividend, I was expecting that question much earlier, actually. I don't want to say we were thinking of even more and we reduced it to EUR 1 because of coronavirus. I think we had extremely successful year 2019. We generated the cash through the dividends out of the portfolio and consulting income, so even without an exit. Our main target is the value creation for our shareholders. I think the success of 2019 and the positive outlook in terms of growing portfolio companies, growing sales, our operational excellence and our planned and expected exits in 2020, we didn't see any reason why not to dividend EUR 1 per share.
Okay, thank you.
The next question is from Helmut Kurz, Bankhaus Ellwanger & Geiger. Your line's now open.
Hello, Helmut Kurz, Ellwanger & Geiger. Actually, Mr. Schuldt asked the question I was going to ask as well. In the presentation, it was very often mentioned growth and opportunities. Of course, unfortunately for some investors, 2020 will have opportunities for active buyers like Mutares is. To use those opportunities better, indeed, we would have really liked that you rather pay less dividend and use the money to go after attractive acquisition opportunities. If you would have to do a capital increase in this environment, it would be much more difficult to raise the funds and you would probably be diluting existing shareholders. Could you again explain why you really, and indeed in the outlook for 2020, you even said that you are going to look for another EUR per share to be paid, which I find a bit adventurous to say this now.
Maybe I start on this one. I think the one you said is very much understood, does not neglect the other one. By letting our shareholders participate in the success of the company, and in fact, I think this is also the nature of our business, that we have great opportunities on the buy side when there is a crisis and when corporates or company try to focus on their core or when company are coming into difficult situations. For us, it's a great opportunity to make nice deals. Nice deals in our world does not necessarily mean take a lot of equity and hunt for deals. On the other side, we want to use our equity to sustainably grow through add-on acquisitions, our existing platforms.
Such as we do with the Donges Group, such as we did with keeeper, and we will continue doing that in 2020. I think it's fully understood what you said, that in this environment, it's important to have liquidity in order to hunt for the great opportunities upcoming. I think this does not neglect the participation in value creation for our shareholders. We have no plan for a capital increase on our level here.
Thank you.
As we have no further questions, I would like to hand back to the speakers.
Thank you very much for joining our call today, and we wish you a good day and Happy Easter. Stay safe.
Bye-bye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.