The international testing service provider, TÜV Rheinland, continued its ongoing healthy growth in the fiscal year 2017. TÜV Rheinland’s revenues increased in 2017 by €54 million or 2.8% to the current figure of €1.972 billion. Earnings before interest and tax (EBIT) at €130.6 million also posted the best figure in the company’s 145-year history. The EBIT margin also inched up 0.2 percentage points to 6.6%. At €91.3 million, investments were at the level recorded in 2016. The average number of employees at TÜV Rheinland over the course of 2017, expressed as full-time equivalents, increased to 19,924. It has since moved past the 20,000 mark.
“2017 was a year of important moves. For three years, we have set the accent on improving profitability. For us this is more important than merely increasing revenues. As a result, we can make considerable investments in important future markets and implement digitalization,” said Dr. Michael Fübi, CEO of TÜV Rheinland AG. This relates not only to the IT infrastructure and software, but also specifically the development of new services for the digital economy as well as investments in inspection technologies for networked “smart” devices and products. Dr. Fübi: “We are not yet completely satisfied with the result achieved so far – especially with a view to some global competitors – but we are on the right track. In a challenging industry environment we continued the successful growth trend of recent years.”
Our home market in Germany developed very positively in 2017. In Germany, TÜV Rheinland’s revenues climbed by €122 million to almost €1.1 billion, representing growth of 12.7%. On the other hand, outside Germany revenues decreased by 7% to €895 million. This was due particularly to what remains the difficult development in Brazil. Overall, at TÜV Rheinland the international share of sales is currently 45%.
Development in the business streams
Traditionally Industrial Services, Mobility and Product Testing have a strong share in overall revenues, each generating approximately 25%. The revenue trend in the Product Testing business stream was again very good in 2017. Revenues increased by 1% to €524 million. The Mobility business stream generated revenues of €508 million (+4.4%). One of the key factors here was very good growth in the Vehicle Inspections and Driving Tests business areas. In the Industrial Services business stream, revenues moved down slightly by 3.4% to €503 million, mainly due to the weakness of the Brazilian market. In Industrial Services, business was positive in Germany, China and Korea.
The Academy & Life Care business stream with the services of professional qualification and corporate health management developed in a very pleasing fashion. Revenues rose by a moderate 3.2%, but significant progress was achieved in terms of the business stream’s earnings in particular. In the ICT & Business Solutions business stream, TÜV Rheinland posted a revenues upturn of almost €8 million or 5.8% to €139 million. The acronym ICT stands for Information and Communication Technology. This business stream bundles cyber security and telecommunications infrastructure services. The Systems business stream considerably improved its results with services for the certification of management systems. Revenues surged by 22.5% to more than €200 million. This was due to various reorganizational measures, which included sales, and to considerable growth with services in the accreditation business. This includes auditing in line with global standards for quality management, environmental management systems, IT security or occupational health and safety.
Further improving appeal as an employer
The good market trend in Germany is also reflected in workforce numbers. The number of employees in Germany rose by 218 to 8,504 full-time equivalents. Beyond the borders of Germany, headcount increased only slightly by 35, as the more than 300 additional jobs outside Germany were offset by job cuts in Brazil. The Group is currently seeking staff for over 400 vacancies. To increase the appeal as an employer and to convince applicants has become important for TÜV Rheinland in many career areas.
“To find meaning in one’s own work – this is what drives TÜV Rheinland employees the world over. Their high motivation and comprehensive expertise create value and establish the foundation for our success,” stated Ruth Werhahn, member of the TÜV Rheinland AG Executive Board and responsible for Human Resources affairs since April 2018. Just how important meaningful work is is shown in a representative survey of the Civey opinion research institute among over 12,000 people in Germany in April this year. Questioned about what most strongly characterizes a good employer, 26.2% responded the balancing of family, leisure and career. Almost 19% stated job security and over 16% purposeful and varied work. Good development opportunities (11.8%) were ranked higher than good remuneration (9.5%).
Ruth Werhahn: “Employees at TÜV Rheinland can develop their knowledge and abilities for the whole of their professional career – just as technologies are developing. This is what makes TÜV Rheinland unique as an employer.”
In order to further increase its appeal as an employer, the topics of diversity and variety are an important element of the corporate culture at TÜV Rheinland. People from 110 nations are working within the company. Gender equality, increasing the number of women in the workforce (currently 15% in management committees, 37% overall), the integration of experienced older employees and the exchange with new specialists is also part of diversity at TÜV Rheinland.
Stable financial situation and investments at the level of the previous year
TÜV Rheinland’s equity increased by almost €13 million from €346 million to €359 million in the 2017 fiscal year. The equity ratio improved from 18.4% to 20.1%. Cash flow from operating activities in 2017 was stable at almost the level of the previous year. It was €161.8 million in the past fiscal year after €163 million in 2016.
As in the previous years, TÜV Rheinland made considerable investments in its future viability again in 2017. At €91 million, investments were at the level recorded in 2016. The focal points were various software and digitalization projects, the expansion of inspection capacity and developing new testing laboratories, especially in Asia, and completion of the expansion and energy renovations at our Group headquarters. In April 2017, the renovated high-rise building started being used again.
Around €10 million was invested in new testing labs, particularly for energy efficiency, electromagnetic compatibility and chemical testing. A highlight here was opening the new state-of-the-art laboratory center in Bangalore, India in October 2017 that has 14,000 square meters of space and employs some 300 staff.
Further focus areas for investments included wireless and cyber security. TÜV Rheinland currently has eight laboratories for testing radio technologies and wireless standards. Such investments in future-oriented technologies and new testing capacity are needed internationally on the market. Our main investment activities also include the expansion of IT infrastructure at TÜV Rheinland itself and the purchase of specialized testing software. The performance of the IT infrastructure was strengthened particularly by means of investments in improved hardware, increased server capacity, and more efficient telecommunications equipment.
Digitalization changes and extends traditional inspection business
For TÜV Rheinland, a look into the future is positive. It is true that digitalization would radically change the inspection business in numerous fields and industries, but at the same time it would extend it. Dr. Michael Fübi, CEO of TÜV Rheinland AG, comments, “For our company, digitalization has several dimensions. First, the internal digitalization and automation of our processes, as well as the expansion of our IT infrastructure. Particularly for us as a ‘people company,’ digitalization is a question of the culture and skills of the people who work for us. Second, the digitalization of our existing services and customer interface for our customers and our business. And last but not least, we develop new services for the digital economy.”
Digitalization now reaches almost every area of life. This applies to the networking in billions of products and applications in the Internet of Things with the design of the smart home as well as to industrial production with Industry 4.0, the learning and working worlds, health care or infrastructure. Dr. Fübi, “In all areas, smart living has one thing in common - networking for the use of technologies requires collecting and exchanging data. No data, no digitalization. No networking, no smart solutions.” Current incidents and discussions about social media platforms, the European General Data Protection Regulation, insecure networked consumer electronics or autonomous driving showed the wide range of the issues of cyber security, data protection and criminal practices.
TÜV Rheinland is reacting here in all areas of the inspection business. The international expert teams for cyber security, future mobility, and inspections in the Internet of Things are industry leaders. In 2017, the Center of Excellence IoT Privacy launched two new test marks for data protection for networked products and smart services. The experts are assuming that in as soon as five years every private household will have roughly 500 electric products and household devices connected to the Internet. It is particularly these “smart” devices which currently offer poor levels of protection. Attacks on critical infrastructures and government authorizations also make it clear just how great the damage can be for entire economies and states. In the middle of May 2018, for the fifth time TÜV Rheinland will publish its global cyber security trends, analyzing such topics and technical trends.
Dr. Fübi, “We take our responsibility for the safety of people, technology, and the environment very seriously. For almost 150 years, we have been accompanying technical innovations, creating greater quality of life and are the engine of a modern society. It is here we see our mandate for the future. All indicators are pointing to the fact that our work will change very significantly, but that our role as an independent testing organization will remain indispensable.”