Business at TÜV Rheinland saw a stable development in 2020. Despite the coronavirus pandemic, the international testing service provider generated revenues of EUR 1.953 billion (2019: EUR 2.085 billion). This corresponds to a year-on-year decline of 6.3%. Due to non-recurring effects that were included in the balance sheet for 2020, EBIT declined significantly to EUR -23.6 million (previous year: EUR 135.6 million). Not including these non-recurring effects, adjusted EBIT for 2020 came to EUR 133.6 million. The number of employees worldwide decreased slightly, reaching an average of 20,657 full-time equivalents over the course of 2020. This is 784 employees or 3.7% fewer than in the previous year. Capital expenditure was stable at around EUR 69 million. “Overall, we have got through the coronavirus crisis well so far. Our business model has proven successful in the crisis,” says Dr. Michael Fübi, CEO of TÜV Rheinland AG.
All around the world, coronavirus measures required TÜV Rheinland to limit its business activities at least partially in 2020. This had a particular impact on business with training and further education and with technical inspections of vehicles. In regional terms, the coronavirus measures had a somewhat greater impact on TÜV Rheinland’s business in Germany, North and South America, and India, the Middle East and Africa (IMEA), while the Greater China region posted slight revenue growth.
Non-Recurring Effects due to Balance-Sheet Provisions
Non-recurring effects in the 2020 fiscal year led to negative EBIT of EUR -23.6 million. This was primarily due to provisions for compensation claims in connection with fraud by the French breast implant manufacturer PIP. Michael Fübi comments: “We bear no responsibility for the damage that PIP caused through its fraud and the falsification of breast implants. TÜV Rheinland never tested the implants, but certified the quality management system. We, like many others, were deceived. More than two hundred courts have now confirmed this. Only two courts in France see it differently. We will continue to fight for an assessment of the fraud perpetrated by PIP that is true to the facts. Irrespective of this, we will of course comply with our accounting responsibility and include risks in our financial results for the year.” In addition, staff and restructuring measures were recognized for the 2020 fiscal year. This was due to savings programs with which the company aims to permanently lower its material and staff costs to the mid tens of millions, thereby increasing its competitiveness.
Successful Operating Business
TÜV Rheinland achieved sound results in its operating business in 2020. EBIT adjusted for non-recurring effects amounted to EUR 133.6 million (adjusted EBIT in 2019: EUR 150.7 million) and the adjusted EBIT margin of 6.8% was only slightly below the previous year’s level (7.2%). “Overall, the results for 2020 show that TÜV Rheinland’s services for greater quality and safety are healthy and successful. We will be keeping to our strategy of further, predominantly organic growth in the following years, too,” emphasizes Michael Fübi.
Taking Responsibility in the Pandemic
TÜV Rheinland believes that it has a responsibility to help tackle the coronavirus pandemic with its services. The company fully utilized its laboratory and testing capacity and its technical expertise in certification and tests in the reporting year, and put its capacity to use in tackling the pandemic. Shortly after the beginning of the pandemic, for example, the company invested in the expansion of laboratory capacity for testing and certifying medical face masks and respirators. The company’s specialists also developed hygiene standards for the catering, hotel and tourist sectors and helped businesses adapt their occupational health and safety measures to the new challenges. In addition, they tested respirators and ventilation systems and introduced the industry’s first standard for aerosol filtering in vehicles. Michael Fübi: “The past year made the need for sustainable business management particularly clear. Challenges such as the coronavirus pandemic and the climate crisis can be overcome only with responsible interaction between people, technology, and the environment. We gear our business toward the principles of the UN Global Compact and the UN Sustainable Development Goals. With a new sustainability strategy, we will step up our environmental and social commitment.”
Occupational Health and Safety and the Coronavirus
TÜV Rheinland has been successfully implementing extensive safety measures since the beginning of the coronavirus pandemic in order to protect its employees’ health. Since February 2020, coronavirus crisis teams have been working in all regions and at Group level to implement hygiene measures and provide information internally. In Germany, TÜV Rheinland called on its employees to work from home wherever possible back in March 2020. At TÜV Rheinland’s location in Cologne-Poll alone, around 70% of the approximately 2,500 employees are currently working from home. TÜV Rheinland has also established clear rules for contact tracking and for business trips, in cases where these are unavoidable. Overall, TÜV Rheinland has identified only a very small number of infections in the work environment since the start of the pandemic. “We need to not only make rules, but also follow them. This has been achieved very successfully, because our employees are committed to doing so,” says Michael Fübi.
TÜV Rheinland has now prepared for vaccinations for its own employees, too. With its occupational medical service and almost 180 company doctors working throughout Germany, the company has very wide-ranging experience and expertise in carrying out vaccinations. “We intend to make use of this to protect our employees’ health actively at this important stage in tackling the pandemic, as soon as vaccines are available for this,” emphasizes Michael Fübi.
Performance in Germany and Internationally
The German home market accounted for 53.1% of TÜV Rheinland’s total revenues in 2020, with the other regions contributing 46.9% accordingly. Revenues in Germany declined by EUR 76.4 million, totaling EUR 1.037 billion in 2020. Outside of Germany, revenues amounted to EUR 917 compared with EUR 972 million in 2019. As in the past, the Greater China region accounted for the largest share of international business, contributing more than 18% of the Group’s total revenues. Like the Western Europe region, Greater China posted a slight increase in revenues despite the coronavirus pandemic. Revenues in the South America region declined significantly.
Its employees also reflect the company’s internationality: In 2020, 57.7% of the company's 20,657 employees were based outside of Germany. In Germany, TÜV Rheinland employed an annual average of 8,745 full-time equivalents in 2020, almost 340 fewer than the previous year. Outside of Germany, the number of employees fell by almost 450 on average for the year.
Development of Business Streams
TÜV Rheinland has divided its global testing and certificate business into five business streams. Industrial testing, product testing, and mobility services together constitute around 75% of the entire business of TÜV Rheinland.
In 2020, the Product Testing business stream made the biggest contribution to TÜV Rheinland’s total revenues. Revenues in this area totaled EUR 557 million, corresponding to a slight decrease of 2.3% or around EUR 13 million year-on-year. This stable development is attributable to factors including excellent revenue performance in China and the Asia-Pacific region again.
The revenue performance in the Mobility business stream was heavily impacted by the coronavirus pandemic. Nonetheless, this business stream generated revenues that were roughly on par with the previous year at EUR 554 million (2019: EUR 558.9 million). This was due chiefly to the acquisition of the company Certio in Spain, with which TÜV Rheinland significantly expanded its network of vehicle inspection centers in summer 2019. Due to national lockdowns in Spain, France, and Chile, business with general inspections was shut down completely in some cases in 2020. In Germany, driving tests that had to be canceled due to the coronavirus were largely caught up on thanks to particular commitment on the part of employees.
The Industrial Services & Cybersecurity business stream generated revenues of EUR 538.1 million in 2020. The considerable decline in revenues compared to the previous year (-9.9%) was largely influenced by the pandemic and by restrained investments in international oil and gas business. In addition, TÜV Rheinland sold two companies. On the other hand, major contracts such as inspections at Berlin Brandenburg Airport (BER) were successfully concluded.
The Academy & Life Care business stream was heavily impacted by measures in connection with the coronavirus pandemic. This particularly affected business with training and further education. Despite extensive digital learning offers that were expanded at short notice, revenues here declined by 23.8% to EUR 228.8 million. By contrast, business relating to occupational health management saw increased demand, as companies required additional advice on planning and implementing occupational health and safety standards.
In the Systems business stream with the certification of management systems, there was a moderate decline in revenues of 3.1% to EUR 214.3 million. The new requirements due to the coronavirus were implemented very quickly. For example, the auditors at TÜV Rheinland conducted around 11,000 remote audits of management systems such as ISO 9001. Pre-shipment inspection business and compliance tests for the Indonesian, Moroccan, and Saudi Arabian markets posted significant growth.
Financial Position and Capital Expenditure
TÜV Rheinland’s equity declined by EUR 132.5 million from EUR 417.5 million to EUR 285 million in 2020. Net cash from operating activities totaled EUR 223.2 million in the 2020 fiscal year (2019: EUR 194.2 million).
Capital expenditure amounted to EUR 68.8 million in 2020 and was thus almost unchanged in comparison to the previous year. These investments once again focused on various software and digitization projects, the expansion of testing capacity and the expansion and modernization of testing laboratories. TÜV Rheinland invested more than EUR 13 million in an electromagnetic compatibility testing laboratory in Japan and in new equipment for its vehicle inspection centers worldwide. In addition, TÜV Rheinland entered the business of testing traction batteries for vehicles in October 2020. Together with the young Aachen-based company ConAC, one of Europe’s biggest and most state-of-the-art test centers for traction batteries is currently being established. TÜV Rheinland intends to invest comparable sums in its own business, and particularly in IT and testing infrastructure, in 2021. “In this way, we will ensure TÜV Rheinland’s future viability in a world of rapid changes,” says Michael Fübi.
Outlook
For TÜV Rheinland, 2020 was a year in which the growing importance of digitalization in all areas of work and life became very clear. The testing company has made considerable progress in digitalizing its services and processes. Remote audits of management systems, vehicle inspections via smartphone, digitalized training services, and a “hack box” for remote testing of cybersecurity at companies are just a few examples of this. “The widely quoted acceleration of trends due to the coronavirus has become particularly clear for us with regard to digitalization. What we have achieved will make us permanently more competitive,” says Michael Fübi.
In view of the good business performance in the first quarter of 2021, an economic upturn in many regions of the world, and initial success from the measures to increase competitiveness, TÜV Rheinland is confident that the 2021 fiscal year will develop positively. Michael Fübi: “Next year, our company will celebrate its 150th anniversary. Our basic idea from 1872 – making technical progress fit for the future with tests for greater safety – is timeless. We will continue to be successful in our mission and contribute to greater safety and quality for people and society, the environment, and the economy.”
TÜV Rheinland stands for safety and quality in virtually all areas of business and life. Founded almost 150 years ago, the company is one of the world’s leading testing service providers with more than 20,000 employees and annual revenues of 2 billion euros. TÜV Rheinland’s highly qualified experts test technical systems and products around the world, support innovations in technology and business, train people in numerous professions and certify management systems according to international standards. In doing so, the independent experts generate trust in products as well as processes across global value-adding chains and the flow of commodities. Since 2006, TÜV Rheinland has been a member of the United Nations Global Compact to promote sustainability and combat corruption. Website: www.tuv.com