2018 fiscal year: Healthy growth with revenue at EUR 2 billion / earnings reach EUR 137.5 million / over 20,000 employees / 1,000 vacancies worldwide / demand for safety and quality remains strong, even in digitalized world
TÜV Rheinland continued its ongoing healthy growth in fiscal year 2018. Revenues of the global testing service provider increased by EUR 26.2 million, or 1.3%, to EUR 1.998 billion. Earnings (EBIT) reached EUR 137.5 million (up EUR 6.9 million or 5.3% against 2017). The EBIT margin rose from 6.6% to 6.9%. On average, TÜV Rheinland employed 20,450 people around the globe in 2018, exceeding the 20,000 mark for the first time. Investments again topped EUR 90 million.
“Safety remains a basic need of humanity, even in today’s digitalized world. Our employees apply their expertise and specialist knowledge to ensure quality and safety. We are continuing to grow, which shows that our business model is proving successful, especially now that we are experiencing increased political, economic and technology uncertainty around the world,” said Dr. Michael Fübi, CEO of TÜV Rheinland AG. “We expect demand for our independent tests and certifications to continue to pick up in the next few years. In light of increasing digitalization and networking, the question that always emerges is whether technology is safe and therefore trustworthy, no matter whether we are talking about simple household products, autonomous driving or networked industrial systems and infrastructure.”
TÜV Rheinland is preparing specifically for this digital future. For example, the Group invested around EUR 32 million in the three areas of cyber security, wireless technologies and autonomous vehicles in 2018 alone. In the long-term, TÜV Rheinland is also strategically gearing its business towards these upcoming developments. “Our aim is to support and ensure technical progress in the long run,” said Michael Fübi.
Significant Growth for Germany, China and Western Europe
Business at TÜV Rheinland performed well in 2018, especially in Germany. Revenue in Germany grew by EUR 32 million or 2.9% to currently EUR 1.1 billion, while revenue outside Germany saw a slight 0.6% decline to EUR 889 million, due primarily to exchange rate differences.
On a constant currency basis, TÜV Rheinland’s revenue would have totaled EUR 2.037 billion in 2018, representing growth of 3.3%. TÜV Rheinland generated 44.5% of its revenue outside Germany. Revenue of EUR 533 million was generated by TÜV Rheinland in the Asia region in 2018 (includes Greater China, Asia-Pacific and India, Middle East, Africa), followed by the Europe region (excluding Germany) at EUR 205 million and North and South America at EUR 153 million. China and Western Europe boosted their revenue by an eight-digit figure year on year, making a major contribution to the upturn in revenue.
Positive Development In Business Streams
As previously, TÜV Rheinland divided its global testing and certificate business into six business streams. The Industrial Services, Mobility and Product business streams each generate approximately 25% of total revenue, with Product Testing making the largest contribution to revenue in 2018 at EUR 541 million (previous year: EUR 524 million). Continued strong growth in China and the recent return to revenue growth in the solar business field, a sign of the global investment trend towards renewable energy, are both striking here. The second-largest business stream, Mobility, saw its revenue climb considerably, up 4.7% at EUR 532 million (previous year: EUR 508 million). Growth was particularly strong in business with vehicles inspections in Germany and Spain and services relating to vehicle approvals (homologation). The Industrial Services business stream also shored up its revenue again. In this area, TÜV Rheinland provides services including global testing of industrial systems, power stations and elevators. All told, Industrial Services improved revenue by 2.1% to EUR 513 million (previous year: EUR 503 million).
TÜV Rheinland has combined the certification of management systems such as ISO 9001 and the certification in accordance with sector-specific standards in the Systems business stream. This saw revenue strengthen by 4.5% to EUR 212 million (previous year: EUR 203 million). The rise in revenue in the Academy & Life Care business stream was somewhat more restrained than in previous years. In this area, TÜV Rheinland offers services for professional qualifications and corporate health management. Revenue in this business stream picked up slightly, up EUR 0.5 million at EUR 227 million. Seminar business in Germany also performed well. Nonetheless, finding skilled workers such as doctors and social education specialists is increasingly challenging and so the business stream did not grow as much as it would have done if sufficient specialists had been available.
TÜV Rheinland refocused its product range in the Digital Transformation & Cyber Security business stream (previously ICT & Business Solutions) in 2018. While cyber security business in Germany fared well, revenue in the United States fell. In total, the business stream saw revenue decline as planned to EUR 122 million due to internal restructuring (previous year: EUR 139 million).
Global Competition for Best Employees
Of a global staff headcount averaging 20,450 in 2018, 8,795 worked in Germany, up almost 300 on the previous year. The number of employees outside Germany rose by 235 to 11,655, representing 57% of all TÜV Rheinland staff in 2018. “We would like to hire even more people. But we can see that competition for the best specialist staff has become tougher, both in Germany and in many other countries,” said Ruth Werhahn, member of the Executive Board and Labor Relations Director of TÜV Rheinland AG. TÜV Rheinland currently has over 500 vacancies in Germany alone, with another 500 openings worldwide. “Anyone looking for technically challenging and varied work in international teams and who shares our passion for quality and safety would be a good fit at our company,” added Ruth Werhahn. “I am confident that we can inspire many more people with this. After all, our vision already reaches over 400,000 followers on social media.”
Financial Position Continues to Strengthen
TÜV Rheinland further bolstered its good financial position in the 2018 fiscal year. Equity increased by EUR 53.3 million to EUR 412.2 million, with the equity ratio rising to 22.8% (previous year: 20.1%). Cash flow from operating activities climbed sharply to EUR 183 million, an upturn of EUR 21.2 million or 13.1%. “Our financial position remains very solid. This provides us with the means required to invest in our future under our own steam,” said Michael Fübi.
Investments and Digitalization
TÜV Rheinland has invested close to EUR 300 million in the last three years, EUR 91 million of which in 2018 alone. “Substantial investment helps us get our testing and certification business in shape for the years ahead,” commented Michael Fübi. “Digitalization is continuing to pick up speed and has made its presence felt at all levels of our business.” This can be seen both externally, in terms of the digitalization of existing services and new services created for the digital world, and internally, in terms of the digitalization of processes. TÜV Rheinland has invested almost EUR 32 million in the three future-oriented digitalization areas of wireless technologies, cyber security and autonomous vehicles. In the Mobility business stream, TÜV Rheinland has invested approximately EUR 7.8 million in expanding and improving facilities at the network of vehicle testing stations.
Services in a Digital World
Starting in 2018, TÜV Rheinland shifted its focus to OT Security – the reliable and safe operation of plants and systems in industrial production. Operational technology (OT) refers to hardware and software that monitor and manage physical equipment and processes. Industrial companies have been employing operational technology in their production processes for decades. What is new is that entire industrial systems are now connected with each other and with the internet. This could create external access, which hackers could use to interfere in the production process. The most recent example of this is Norwegian aluminum manufacturer Norsk Hydro, which was forced to cut production to emergency operations for days following a massive cyber-attack. “More and more companies are linking their industrial systems to the global network because there are many advantages to doing so. But are they properly prepared for potential cyber-attacks? Many companies are unable to provide satisfying answers to this question and so companies across the world come to our experts looking for advice,” said Michael Fübi. As well as in Germany, this special aspect of cyber security is also sought after in the US, the Middle East and in the Asia-Pacific region. In 2018, TÜV Rheinland opened a competence center for cyber security in Kuala Lumpur (Malaysia) in response to this demand.
New Wireless Technologies Labs
By investing in its wireless business, TÜV Rheinland buoyed its position on the rapidly growing global market for devices on the internet of things (IoT). In 2018, TÜV Rheinland opened new labs for testing wireless technologies in Lund (Sweden), Shenzhen (China) and Nuremberg (Germany). TÜV Rheinland is a leader in this segment thanks to its global network of laboratories in Asia, Europe and North America, as well as its extensive services along the entire value chain, where experts test technology such as smart phones and smart-home devices on behalf of manufacturers.
In 2018 and as part of an objective to make better use of digitalization opportunities, TÜV Rheinland set up an area with experts in data analysis which would provide support to all business streams regarding their data usage. The company also continued to expand IT infrastructure, purchased highly-specialized testing software and technology and launched collaborations, for example with the start-up DeepL, an automated translation provider. Since the beginning of 2019, TÜV Rheinland has also been working with the start-up accelerator “Plug and Play”, which promotes contact between the world of start-ups and established companies.
Strategy: Safety in the Future
TÜV Rheinland is currently working on its future strategy, which focuses on the dynamic change sparked by digitalization across the entire testing sector and its customers. “TÜV Rheinland’s ultimate goal is to support and ensure technical progress in the long run,” said Michael Fübi. “We have built trust in our work and in our brand. Our predecessors began this almost 150 years ago, and we will continue to uphold this undertaking in the long term.”
The 2018 TÜV Rheinland annual report can be found at www.tuv.com/corporatereport