ladies and gentlemen, welcome to the Earnings Call Financial Year twenty nineteen. At our customers' request, this conference may 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. May I now hand you over to Jessica Albert, who will lead you through this
afternoon, everyone, and welcome to our earnings call for the full year 2019. On our call today, our CFO, Marc Friedrich and our CIO, Johannes Straumann, 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. Now let me hand over to Johannes Thelmann.
Good afternoon, everybody, and welcome to our presentation today. Before we will go into details of our financial year and results 2019, presented by my colleague, Marc 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. So basically, when we talk about our business model, we aim for a maximum value creation. And this is created by four steps where we decided to go into a risk position because we understand the risk repurchase. Secondly, we request the seller to fund the business for us.
And 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. And 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. So 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 Mutaris. We divide our model into and break down into the four sectors coming from the four phases talked about in the previous slide.
So and I would like to give you that with an example. In end of twenty seventeen, we bought Dongas Group. Dongas Steeltek was roughly 40,000,000 in sales, slightly below our target to acquire companies between 50,000,000 and €500,000,000 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 Mutaris Holding. And then surely slowly but surely, we added companies inorganically like Calcisib STT and the 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. And this is what we have followed with the Dongus Group. So three steps of the Dongus Group are completed. This business model and this three step approach has brought roughly €90,000,000 in cash in the last five years to the Mutares holding level, which we 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, now have six offices.
Last year, we opened in The Nordic after the acquisition of the company. And 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 close to €1,000,000,000 in sales in 2019, and it was, on the acquisition side, the most successful year of Mutara's 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. And for the whole portfolio existing, including potential exit proceeds, we look on the return on invested capital between five percent and ten So 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 €1,000,000,000 in sales, which is an increase of roughly €150,000,000 of course, driven by our acquisitions we have conducted in 2019. EBITDA adjusted EBITDA grew.
Cash and cash equivalents slightly decreased, so did the equity ratio. Marc Friedrich will, in the future slides, also speak about that much more in detail. But 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 Dongus Group.
We realized the first synergies. The day before, we received another €25,000,000 order for Dongus on a large bridge project, and we are currently quoting on similar sized projects in Germany and in The Nordics. Balkedeur did a successful separation of the Rotemulle business, which we separated from the core Balkhedeur 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 Alastomeric Group, as said before.
And again, as you could see out of the press release, the dividend which we have proposed is €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 some the last time, we also had questions on the portfolio as such. We did significant development of the Dongas Group, Normick, FTT and Ruchi. Ruchi is still under merger control. However, we have a strong belief that we can expect the closing by end of this month.
We bought Trefiluno and Plati. We bought as platform the Keeper Group, where we add already a Metso Tissue business in 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 TECO, and the largest transaction in 2019 was Beck City, which we bought from the Austrian railway company. 2020, we already had two acquisitions: Loterios as a strategic add on for Balka Dirtu's transient product portfolio and geographic footprint in Italy and then Nexive, which is the postal service provider, the number two in the Italian market, and we expect a closing here by summer of this year. So this was it from the acquisition side, and I would like to hand over for the financials deep dive to Marc Friedrich, our CFO.
Thanks, Johannes. And I start on Slide 13 with an overview of the P and L. As Gianno already mentioned, our P and L is mainly driven by the acquisitions that we did in 2019. And you see here that we are slightly above €1,000,000 and we are quite proud of it because we kind of forecasted it during the year to go above 1,000,000,000 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 decreased, and that's mainly due to the IFRS 16 effect, which is approximately €20,000,000 in 2019, which is moving from other expenses to depreciation and interest expense. We ended the fiscal year with approximately €80,000,000 in EBITDA, mainly due to 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 €1,500,000,000 On Page 14, we have here the split of the adjusted EBITDA.
You see that the main income comes from the bargain purchase, which is related to the transactions we did, mainly Trefurignon, Keeper and Back City. On the other hand, we started the restructuring in most of these acquired entities already in 2019 and had one off expenses, especially for social plans of EUR 70,000,000, but also other restructuring and consulting expenses of approximately EUR 5,000,000. 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, there's a zero. On Page 15, balance sheet, again, increased in terms of total assets. We reached approximately eight fifty Half of the increase is due to IFRS 16, where you can see on the asset side in the noncurrent assets, the right of use assets with approximately 120,000,000 which is the effect that we pretty much have no off balance leasing anymore. Therefore, we have the right of use that is then depreciated over time. But on the other hand, we have also the liability in noncurrent 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% 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. But not all of the companies have the same effect.
SCS and Kiko are the ones which had with the SCS a good year 2019, at least second part of the year. CECO started the restructuring in 2019 and could fulfill two major steps out of four. And these two companies are looking forward to a challenging year 2020 with the plants closed in Europe. On the other hand, we had or we have Elastomer Solutions, where we already heard that the company really strongly recovered from 2018 and came back to profitability level in the double digit numbers in terms of EBITDA. And together with Plati, this company was actually producing until last week.
And this is kind of 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. And these companies deliver to, for example, to Asia, where the economy is already recovering. And also, Plati, for example, delivers only 50% into the automotive sector and the other 50% into, for example, the health care 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 Dongas Group, and Johannes already explained it all the time and the calls during 2019 and already mentioned again that we're looking forward to the closure of the add on acquisition called RUKI by the end of the month, which will significantly impact Dongos Group positively, we believe, and we already prepare with the team the takeover.
On the other hand, we have Gemini in the 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. And the company is looking forward to a quite good year 2020. Turning to Page 17 to the segment Goods and Services, where we see most of the acquisitions with Trefur, Lyon, Keeper and Bag City. And also, for example, the acquisition of Nexiva will be part of the Goods and Services segment. Revenue, therefore, increased quite significantly, and Back City was not even contributing to that sales level since we acquired the company at the end of twenty nineteen.
In this segment, we saw that or that the acquisition of Keeper 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. SENPA is undergoing or it looks like that SENPA is undergoing the same as ELASTOMEA did in 2018 and 2019. It was quite a challenging year, 2019, after a very good year 2018. And now we see that the company is recovering quite well in 2020.
And we believe that the company can come on back on track to a very positive level in 2020. Coming to Slide 18, which we consider as quite an important slide and that should give you also some more transparency and some guidance how we view our business model. You see here these three phases that Johannes already mentioned, realignment, optimization and harvesting, that portfolio companies normally undergo when they are part of the Mutaris Group. In the realignment phase, we execute our restructuring plan. And therefore, you see here the six platform investments, including Bagcity and Primotex that we currently have in the portfolio.
And it's also, for us, totally normal that this is negatively contributing to the adjusted EBITDA with in 2019 with approximately €40,000,000 This company must be always red, and there must be always a certain number of portfolio companies in that phase due to our goal to have a well diversified portfolio. And the number must be read since we then 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 and to the right positions. And we also look for add on acquisitions. And normally, the companies from the realignment phase should move on to the optimization phase after nine to eighteen months. In the optimization phase, the company should have at least a breakeven adjusted EBITDA, which we also see here. Gemini contributed quite positively.
Dongas Group with the add on acquisitions contributed actually negatively to it, which is also quite normal when we acquire add on acquisitions that I was 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. And in this phase, the adjusted EBITDA must be positive, must be a sustainable positive. And this slide should give you a good guidance.
What actually have in mind for 2020, for 2021 and should give you some more transparency about the cumulated adjusted EBITDA of only 7,000,000 this euros which is quite differently along the phases, which is quite normal in our business model. Then 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 and A activity will be or will kick up again in the second half of twenty twenty. We already or we still look at transaction or potential transactions also this time of the year, but we believe that the M and A activity will increase significantly in the second half of the year.
We already did two transactions in 2020 that we or where one could be already closed, and the other one will be closed in 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 twenty twenty of more than €1,500,000,000 So this all should contribute to the final goal that we want to sustain our dividend capacity and our attractive dividend policy of at least €1 for the next years. And with this, I hand over back to the moderator.
You. And the first question is from Alina Koehler, Haugen, Alphazar. 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 as said before, one of our key measurements, the key measurement 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. And 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. And secondly, I think it's important that we follow the growth path because the overall sales and the creation of value in comparison to the sales is one of our main targets also for the upcoming years.
Okay. And my second question would be, could you provide a little bit more color on the portfolio companies? Like what companies should be hit the hardest? And like, for example, FCS comes to my mind there. What is the future going to look like?
And what is Monteris going to do?
I'll start, and Johannes will add. First point that we actually want to highlight is that the portfolio is or not all portfolio companies are hit hard by the coronavirus. We also have companies that kind of profit from the coronavirus. For example, Sao Paulo, where all main competitors are in Italy, and therefore, they have kind of a free road. And on the other hand, you already mentioned correctly that the hardest hit industry currently is the automotive industry.
And 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 April and then ramp up the business during the Q2. We also have through STS, we have plants in China. And we heard this morning in the call from the STS management that the Chinese plants already are close to 100% production level again. So 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 Mutaris 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 Mutaris holding that mentioned that case.
So we are quite luckily so far. And we have sent pretty much everybody into home office. But we can really work quite well for a couple of weeks together just by phone and laptop. So we already addressed the problem, and we believe that we have to refocus already again, and that's what we also did the consulting team already, to prepare the ramp up because that is going to be also challenging for us and for our suppliers and customers to increase now the production again. And we look for smart ways to have the right resources at the right time in the production at the right shifts.
Yes. Maybe I can add two examples, Marc was mentioning, one I was flagging earlier. For example, a company like the Dongus Group, which is a, so to say, let's say, a large and heavy asset in our portfolio, The construction industry is still doing okay. So we received large orders. There's, as we speak, no short time work in the whole entire group.
So they are not impacted by this so heavily. And 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. And 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 you in the very beginning, it's, I think, a very, very nice situation also to come out of this situation with a very strong cash balance and with a very strong cash on hand. So 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, much better than it is today.
And last but not least, of course, no one could expect that. We acquired, as I said before, for Keeper, and I explained that the toilet paper thing. The acquisition of the add on for Keeper was at the right time. We produce now part of toilet paper. We produce masks there.
So and they're all able to do that. So this was, so to say, a little bit the lucky shot then that this is a great upside on a great company. So we were very much convinced about the business. And now we had the 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.
The
next question is from Horger Stefan, S and P Research.
Good afternoon altogether. I have a couple of questions. The first one is an additional question about SKS Group and other companies. In your annual report, you've mentioned that especially STS and Kiko need additional financing to manage the crisis. Do you see both companies as candidates for public health?
And which other companies of your portfolio may use public finance programs?
Correct. Both are candidates for public health. 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 companies or every portfolio company use or is trying to get the maximum of public help they could get. And the easy form is to go on short term work, but also to obviously apply for every program that they are eligible for.
And that is not kind of not narrowed to companies that potentially need. It's more like we consider every company to be affected by the corona pandemic. And therefore, 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.
Fine. You expect now to finish by the April. What is the basis for this assessment?
The confirmation of the merger control authorities in Finland.
Okay. It's still working and Very simple. Okay. In 2019, the depreciation in the group increases significantly to €53,000,000 partly due to IFRS 16. Can you give us a thought note about the main effect and your expectation for 2020?
So the effect of IFRS 16 in the depreciation is EUR €16,000,000 And I think the level in 2018 was something like 30,000,000 So approximately 80% of the increase is due to IFRS 16 and the rest is just for the is due to the increasing portfolio.
And do you expect the same level in 2020?
I expect even more. For example, Ruki owns every location they have. So therefore, I would expect that the depreciation level substantially increases.
Okay. But it depends on the coming acquisitions, right?
Yes.
And exits.
And exits. We will come to exits later. You have mentioned Rotemuller, which was separated from Baikadur 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. So there's a portion in Poland and a portion in a company in Germany, but which acts internationally. So what we saw in Q1 is more or less stable. So Poland is a little bit up and the German entity a little bit below plan. But 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 sun.
Okay. We didn't speak about the holding P and L until now. Maybe you can give us some short comments about the revenues and the tough cost of the holding in 2019 and your expectation for 2020.
The holding sales level increased to approximately €20,000,000 from €10,000,000 That's partly due to change in the way we send invoices. That is all coming now from the K from the Mutaris and not anymore from country Mutaris entities. And on the other hand, it's clearly 5,000,000 that we have in new sales that is due to the acquisitions. Therefore, we have in the report that we just that we published this morning, you see a slide with the number of employees that the group has, but also the number of employees that Mutaris has, and you see a significant increase here. And 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.
And we believe that the sales level will substantially be above €20,000,000 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. So we 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 spend alone. Is this planned for the near future?
No, 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?
Last day.
Thank you very much.
So far, we have no further questions. The next question is from Tim Schultz, Pareto Securities. Line is now open.
Actually, I have two remaining questions. First one, could you give us the cash level on holding company level end of the year? So that would be one. And 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 €1 level. So
first question, holding cash at the end of twenty nineteen was approximately €10,000,000
And on the dividend, I was expecting that question much, much earlier, actually. I don't want to say we were thinking of even more and we reduced it to Europe because of coronavirus. But I think we had an extremely successful year 2019. We generated the cash through the dividends out of the portfolio and consulting income, so even without an exit. And our main target is the value creation for our shareholders.
So 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 €1 per share.
The next question is from Your line is now open.
Hello. Helmut Koch, Elanger and Geiger. Actually, Mr. Schuld asked the question I was going to ask as well. In the presentation, it was very often mentioned growth and opportunities.
And of course, unfortunately, for some investors, 2020 will have opportunities for active buyers like Muthares is. And 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. Because 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. So 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 euro 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, but does not neglect the other one. So 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 crisis and when corporates or company try to focus on their core or when company try are coming into difficult situations. For us, it's a great opportunity to make nice deals. But 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 Dongus Group, such as we did with Keeper, and we will continue doing that in 2020. So I think the 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. But I think this does not neglect the participation in value creation for our shareholders. And we have no plan for a capital increase on our level here.
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.
Ladies
and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.