TÜV SÜD Annual Results Press Conference                                                                                       17 April 2018

TÜV SÜD continues its growth trajectory: Revenue rises to over EUR 2.4 billion

•    Investing in the future: EUR 123 million spent on testing infrastructure and digitisation
•    New records: EUR 2.427 billion in revenue and EUR 216.7 million in earnings (adjusted EBIT)
•    Growth markets: digitisation – cybersecurity – autonomous driving

Munich. TÜV SÜD has been passionate about people, the environment and technological progress since 1866. In 2017, the globally operating service group set new records for revenue and earnings. Year-on-year revenue increased by around 3.6 per cent to EUR 2.427 billion, while earnings before interest and taxes (adjusted EBIT) rose by over 7.4 per cent to EUR 216.7 million. Worldwide, more than 24,000 people work at TÜV SÜD – almost half of them outside Germany.

TÜV SÜD has a track record of years of sustained growth, driven by dedicated further development of its services and continuous expansion of its network of experts and laboratories. In 2017, the international service provider invested approximately EUR 123 million in expanding its testing infrastructure, in developing services and business models in the fields of digitisation and the Internet of Things (Industry 4.0), as well as in training of its staff to ensure digital readiness. The trust placed in TÜV SÜD by customers all over the world is one of the key reasons for the company’s ability to continue posting profitable growth in 2017 in the face of the difficult global situation. “Political uncertainties, negative currency effects and protectionist tendencies have also impacted our business, which is essentially associated with the global trade of goods and access to global markets – as well as the safety of products, infrastructure and processes”, explained Prof. Dr.-Ing. Axel Stepken, Chairman of the Board of Management of TÜV SÜD AG, at the company's Annual Results Press Conference in Munich. In spite of this difficult situation, the international provider of technical services succeeded in increasing revenue to EUR 2.427 billion and adjusted EBIT to EUR 217 million in fiscal 2017, thereby setting new records. The company generated 42 percent of its revenue from customers outside Germany.

Broad success
According to Dr Matthias J. Rapp, Chief Financial Officer of TÜV SÜD AG, a particularly encouraging factor is that all operating units contributed to the company's success in fiscal 2017. “The MOBILITY Segment once again achieved impressive revenue growth of over 5 percent to EUR 772.4 million. The INDUSTRY Segment increased its revenue slightly by 0.3 million euros to over EUR 961 million, while the CERTIFICATION Segment continued its success story, growing by 7.4 percent to roughly EUR 714 million.” Dr Rapp noted that positive development was also shown by the Business Assurance Division, established by TÜV SÜD in 2017 as part of the CERTIFICATION Segment to address the growing need for new security measures surrounding digitisation. “The fact that our cybersecurity services are already contributing to the growth of this division is highly encouraging”, stated the Chief Financial Officer, noting that this sends a positive signal for future development in this important area and for TÜV SÜD's entire rapidly growing service portfolio in the field of digital transformation.

The company’s strongest region in terms of revenue in fiscal 2017 was again the EUROPE Region, covering Europe including Germany. Revenue there grew by 4.8 per cent to over EUR 1.8 billion. “Our domestic market of Germany, where we recorded revenue growth of 6.5 percent, contributed more than EUR 1.5 billion”, declared Rapp. “In view of our large market share and fierce competition, this is an excellent result.” Growth was strongest in North and South America, where revenue increased by 7.2 percent to over EUR 220 million. The ASIA Region contributed EUR 380 million to the Group's consolidated revenue.

Looking at current business, Rapp said, “We got off to a successful start in 2018 and I am confident that we will be able to sustain our robust business development.” He listed the key success factors as the company's international network of testing laboratories, its broad range of services – which also cover new and innovative technologies – and the expertise and experience of its over 24,000 employees throughout the world.

Expansion of global testing infrastructure
In 2017 TÜV SÜD continued to invest heavily, spending more than EUR 123 million on the further development of the company. Focus areas of investment included the expansion of global testing infrastructure, development of new services and business models in the field of digitisation, and preparation of the workforce for the challenges involved in digital transformation. In the USA, the company invested a total of nine million euros on projects including the construction of a cutting-edge electronics testing laboratory. In Scotland, TÜV SÜD started on construction of a research and development centre for subsea pipelines, which will require capital expenditure in excess of EUR 10 million over the coming years. “We will consistently continue to modernise and expand our testing facilities”, announced Stepken. In China alone, the international service provider plans to build three new battery technology centres over the next two years. These centres will complement the existing network of laboratories in Germany, Canada, the USA and South Korea. “On top of this, we have started the construction of new premises in Singapore, where we intend to bring together our units and testing facilities at one site”, declared the Chairman of the Board of Management. This also includes the Centre of Excellence Digital Services in Singapore, which opened two years ago.

The other focus of investments at TÜV SÜD concerns digital transformation of our existing core business and the development of new services and business models. “This development is spearheaded by our two Centres of Excellence Digital Services in Singapore and Munich as well as our legal entity Digital Service GmbH, founded in 2016, which initiate and drive important projects”, explained Stepken. This also includes the Singapore Smart Industry Readiness Index, which TÜV SÜD developed on behalf of the city state's Economic Development Board (EDB). Companies can use this index to determine their status quo in terms of Industry 4.0 and use the result as a starting-point for developing individual digital transformation strategies. Other TÜV SÜD innovations focus on data security and cybersecurity. “Enquiries about how to improve data protection and cybersecurity are reaching us from virtually all industries”, said the Chairman of the Board. “These are precisely the areas in which we will massively expand our expertise and services.”

Sealed Cloud and cybersecurity
The acquisition of Uniscon GmbH in 2017, a supplier of highly secure cloud solutions for data processing, was a milestone in this development. “By taking this step, we are realising our declared objective of exploring new avenues and developing new business models”, emphasised Stepken. “The acquisition of Uniscon has enabled us to position ourselves at the core of digital transformation and take up the role of a provider of a reliable and secure platform for handling sensitive data.” Uniscon's solutions offer secure data processing with the unique feature that not even the platform provider is able to access customers’ data. The scope of the Sealed Cloud technology extends from analysis of video surveillance in public spaces to secure processing of medical data and applications in the insurance or automotive industries.

Data may be secure in the Sealed Cloud, but other applications and environments also need to be protected against cyberattacks. In order to support companies even better in managing these risks, TÜV SÜD combined last year its activities and services in this field 17 under the umbrella of the Business Assurance Division. “Aiming at risk minimisation, we have brought together organisational process reliability, technical process safety and digital process security in this division.
It also provides transfer of the relevant expertise in areas such as employee training”, explained Stepken. Core business of the division are “conventional management system certifications” according to international standards, such as ISO 9001, ISO 14001 and ISO 50001. In addition, the division supplies new services in fields such as data protection and cybersecurity; examples include support with implementation of the new General Data Protection Regulation, which will come into force on 25 May 2018 and introduces strict requirements on the handling of personal information, and support with cybersecurity of industrial control systems, which is monitored and improved using a variety of tools including risk analysis, information security management and penetration tests.

Autonomous driving and automotive platform
The topic of digitisation is also dominating the automotive sector. “We contribute our comprehensive experience, gathered from vehicle homologation and periodic technical inspections, to important research and pilot projects”, said Stepken. For instance, TÜV SÜD's experts not only supported the approval of the first autonomous passenger bus in Germany; they are also working with the German Research Centre for Artificial Intelligence (Deutsches Forschungszentrum für Künstliche Intelligenz (DFKI) on designing an open development platform to be used by automotive manufacturers, suppliers and technology firms. As part of a VdTÜV initiative, TÜV SÜD further developed a solution for an automotive platform that provides secure and manufacturer-independent access to data produced by modern on-board vehicle systems. “These data are of interest for various types of applications, including individual servicing and maintenance intervals as well as determination of insurance premiums”, explained the Chairman of the Board. However, he warned that the development of a market for these services would depend on whether we can succeed in ensuring secure and impartial data handling.

Further information available on the Intranet
•    Content of the press kit at http://www.tuev-sued.de/balance-sheet-press-conference
•    TÜV SÜD Annual Report 2017 at http://www.annualreport.tuv-sud.com.
•    High-resolution photos at www.tuv-sud.com/pressphotosin the “Media Photos” section.
•    Podcast and original quotes by Prof. Dr.-Ing. Axel Stepken at www.tuev-sued.de/audio-pr (will be available from 4 pm on 17 April 2018).