Mutares SE & Co. KGaA

Good afternoon everyone and welcome to our earnings call for the financial year 2020. On our call today our CFO Mark Friedrich and our CIO Johannes Laumann will present you the results and most relevant events of the financial year 2020. After the presentation we are happy to answer your questions. The presentation shown is available on our website. Before we 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 Helmer.

Good morning, good afternoon, good evening, everybody. Welcome to our presentation of the annual results of 2020. A warm welcome from my side. Hope you guys had a good Easter break, and we would like to present you shortly and remind you on the business model, our DNA, our guidance, and give you a sniff on our track record, and then followed by developmental financials, which will be presented later on by my three pieces here. Let me remind you on the guidance and where we stand. In October last year, we put out a guidance to the capital market, what are our mid-term targets we want to achieve at Zotaro. So the first one was we want to grow the consolidated revenue to $3 billion in 2023. Coming from last year, where we closed with a billion in sales, In 2019, 2020, we closed with 1.6 billion, which is already an increase of 60%. Coming to the holding revenue and holding profit, which developed in 2019, 22 million to 33 million in 2020, which is an increase of 50%, and we aim to be at 60 million in 2023. We want to deliver a 7 to 10 times return on invested capital on our assets all over the cycle, which we have already proven end of last, beginning of this year, with the exit of Nexiva, with the exit of the Votermuller Group as part of Balcadur, and with the signing of the SDS Group AG transaction, where all of the three transactions were in or above this range which we have set as our target. We want to have a growth in dividend and we want to have a sustainable dividend where we set our target of having one euro of base dividend and additional performance dividend which we fulfill in 2020 by paying out one euro as base and 50 cents performance dividend for the exit of Nixies. And last but not least, we want to be a leading brand in the turnaround industry in Europe And we want to grow our group. We want to grow our consulting business where we have set a target to lead to 140 people in the consulting business in 2023. We increased from 40 people in 2019 to 70 people in 2020. And we have a strong plan to increase further this year to roughly 100 people in this practice. So overall, we are absolutely on the right track concerning our guidance. We have made a big step towards the achievement of the goals, and I think this is a very satisfying outcome of the year 2020. Let me remind you on the basis, on the ground of Mutari. not only being our self-perception of being turnaround heroes, we also have increased our local presence. We opened an office in Madrid and we opened an office in Stockholm, Indiana in 2020, where we already see very good development on the pipeline side, buy side as well as sell side. We extended our... sweet spot coming from a mid-sized company which we focus on 50 to 500 million of turnover, I would define our sweet spot now in the range of 100 million to 300 million sales coming to that. And last but not least, the integration of ESG criteria became more and more in the focus, and we really tried to meet the standard, meet the target for sustainability goals we have set for ourselves, which are beyond minimum standards. Giving you a little sniff on the track record, because I think it's a quite amazing track record of the last 24 months. And I think this is also a good moment to thank our people, to thank the team who made this amazing work and who made this track record happen. And I think I'm speaking here also on behalf of the entire board and the entire senior management here. We had a strong path of success. So we accomplished 21 acquisitions. We were very active on the add-on side. We drove further the diversification of our portfolio, of our assets, and at the same time we also did the risk mitigation by really growing our three pillar automotive engineering and service more or less with the same speed. We exited seven companies. We purchased 1.9 billion euros in revenues in the last 24 months. This 1.9 billion euros came along with almost 10,000 people. We have significantly increased our offices in 2019 and 2020. And by the end of March, we have increased our market cap by more than 200%. And this was the number of the end of March. Today, this is even a little bit higher. And as of today, we are having the all-time high record

in share price.

When we look at our portfolio, and here you can clearly see the diversification and risk mitigation in the three pillars. We have the automotive and mobility, which is an early cycle and had a very strong hit in the 2020 Q1, Q2, Q3 due to COVID-19. We have engineering technology, which is a late cycle, where the hit came a little bit later. And we have goods and services where we try to mitigate the risk where we have non-cyclical businesses under our wing. The second thing which becomes obvious on this slide is that we have re-established with a very, very strong path our French practice. So, I believe France is a good market for us. We have positioned the new Mataris approach after having some disappointments in France. We have purchased four companies recently, which you see here is Clesim, La Rochette in the engineering and technology sector, as well as La Paire and as well as Cagnes-Masson, where we have the closing as we speak. So this is a very strong case, very strong country coming back in 2020 and I would like to reestablish Metaris as a very strong and reliable partner for the French corporate. And the third point which is a takeaway of this is especially on the companies who are longer in our portfolio and taking into account current market conditions, and current strategic approaches in order to readjust their portfolio and sell their portfolio, we also do see great exit potential in the next 12 to 18 months on our existing portfolios, which we will try further and we will strike a deal the moment we believe it's the right time for the right price. Quickly summarizing the highlights before I hand over to the financial part to Mark Friedrich. I think on the acquisition side, we have proven the 2019 and even over exceeded. We still dream and aim for one transaction per month. And as we speak at the moment, I think we are on a very good track. Three bite-sized signings, two further acquisitions, and there is a lot more to come. The pipeline has a reliable portfolio in it, so you will see us striking the one or the other in the next weeks and months. Operational preferences, what we saw on the development of the portfolios, which will be also seen in the figures later on, but also try the exit potential is that the second half of the year, and there especially the fourth quarter, came in extremely strong. in the businesses and we saw first recovery of the losses COVID based in the first half. So also there we are trying in the right direction and we want to use the momentum and one or the other portfolio to strike for a deal on the exit side. With that I would like to hand over to Mark and going into the financials.

Thanks Johannes. So, hello from my side also. One key milestone for the development in 2020 was clearly the raise of the bond per time on the Mutaris holding level, which added pretty much $70 million to the shooting power to develop the Mutaris Group for the investments in add-ons, in acquisitions, and the portfolios. On the other hand, the development of the group also contributed to the net income and holding level, where we were able to increase the sales, so our consigning income, and substantially increase our net profit at the holding level to $33 million. That came in then with a bit more than 2% of group revenues. which was one of the key pillars of the guidance that we communicated in October, where we said that we want to have 2% net reside on holding that is based on group sales. That brought us to the decision to propose a dividend of one Euro 50 to the annual shareholder meeting, which will take place in May. And Johan has already mentioned that Part of that dividend, the 50 cents is a performance dividend based on the transactions and dividends we received in 2020. Looking at the key financials and in line with what we communicated in October for the first time, we present some holding figures clearly on the first page here. Starting with the group figures, revenues increased by more than 50%. EBTA increased more than 40%, more than 50%, almost 100% here. But on the other hand, adjusted EBTA went in the opposite direction, which is clearly a good sign due to our business model, and we will see it later where this comes from. On the other hand, Simutas Holding's consignment revenue increased more than 40%. due to the increasing number of portfolio companies, where we are to do a lot of work now with our now 70 consultants, and on the other hand, the management fees, which also includes the dividends that we received from the portfolio, again, increased substantially from almost 50% to 65 million, 66 million. We have included in the backup the group P&L and the group balance sheet, and we believe that it's more interesting to look at the different segments and different portfolio companies, and that's why we start with that. First, with the automotive and mobility segment, where we saw a substantial decrease in activity in the first half of the year due to the lockdown and closure of the plant. On the other end, we saw a very strong recovery in second half, which is also kind of holding on into one, 2021, where we see that the directification across the different industries, the different countries, and also especially across the different OEMs as customers, helps us very much to really develop that segment. and to see a very strong recovery in 2021. A key milestone in the segment is clearly the sale of the RTS Group, which will take place in the first half of 2021, where we will use a cornerstone asset, and we are working on different transactions to add to that segment, again, very well-known cornerstones in 2021. One last remark, the acquisition of the SST Group, a group that is operating also in India and across Europe, was the transaction with the biggest bargain purchase in the history of the Mutals Group, with approximately 60 million. The second, engineering and technology, was for a long time quite stable, but then we had to acknowledge that, especially by the year, was hit by the lockdown since the service guys did not go to the site and therefore we saw that also here the organic revenue development was negative. On the other hand, we were able to close the transaction of Nordic in the beginning of April, which was contributing significantly positively to the adjusted EBTA. And also the acquisition of LaCroix and Tress was a really good projection from our perspective since this company is developing quite fast and we strongly believe that we will see a very fast turnaround. Last segment where we see the highest M&A activity was the segment goods and services where we added some big companies, some big groups Namely here, the Nextiva, Backcity, and Charanois, which all are having more than 100 million in theft on a full year basis. So that's what you pretty much see here in the development with revenues north of 400 million. On the other hand, the adjusted EBITDA was substantially negative, mainly due to the Nextiva group, but also the Shafir Union group. On the other hand, especially back city and cheaper plastics were able to deliver revenues on budget level. So quite resilient against the COVID-19 development in 2020 and therefore also contributing positively to the disaster DBTA. Coming to the famous life cycle stages where we see that pretty much everything that we explained now results in a very well diversification of the portfolio across the different lifecycle stages. We have now nine companies, leaving aside Nextiva, in the realignment phase and, or had nine companies in the realignment phase at the end of 2020 and we will adapt these stages for the Q1 and we'll see that a lot of companies that we currently show here in the realignment phase will move on to the optimization since we see here a really nice progress in the restructuring phases, especially at the companies Zabo, Terranor and LaQuantis. We actually expect that the companies or the buckets Optimization is closer to break even. We were not able to deliver that in 2020 mainly due to the Baikonur. We saw here the good performing parts of the Baikonur in 2020 and closing of Rotomule in 21. So it was not a surprise to us and we will work on having the optimization bucket closer to zero or even positive as it was in 2019. Looking at the right side, we wanted to show you that we at the Mutaris Holding had revenues across all stages here. Due to the business model, obviously, the major part comes from the realignment phase, since there are the majority of companies, and that's our core business, to extend in our team in the restructuring phases in the beginning, so almost 20 million of the 31 million of contracting revenue came from the realignment phase and you see that we don't take off the hands once the company moves on to optimization and harvesting both stages also contribute approximately 20 million to the contracting revenue. And with this, I hand over back again to Johannes for the closure.

Thank you very much, Mark. As a summary, quickly for... for this session before we continue with the Q&A part. I think what we see is that operationally, our company has a strong comeback on the COVID-19 effect, which we saw on the first half, in the second half of the year. And of course, the COVID impact gave us a great opportunity on the M&A side, and we had loads of activities in 2020 and already started with lots of activities in 2021, and this will also continue. We had already two closings with Klesium and Eksi on the buy side. We had two closings on the sell side. We had two signings, La Rochette and Carglass Maison, while Carglass Maison is in the closing today. And we have one signing on the sell side, which was the well-known by the audience, SCS Group 18 exit and the sale to other partners. We have a target annualized revenue, including the fund acquisitions of today, 2.2 billion already secured, so any additional swing will come on top here for 2021. And we are well on track with our guidance, with our targets of having the group revenues, 3 billion holding revenues, 100 million, 2% of the group revenues, so 60 million as holding that income. So we are well on track there and we have made a big jump in 2020 towards the target in three years from now. And we have hold our promise having a sustainable dividend of one euro at the baseline and we will let you, as the shareholders, also participate in the success of an exit, in that case Nexiva, with another 50 cents per share. So with that, I would like to close the presentation of the annual... report 2020. I would like again to use the opportunity to thank the whole team for the great contribution and already the wonderful start in 2021 and it's really a strong team effort and I'm happy to be part of the family. Thank you very much and now I would like to hand back to the moderator to facilitate the Q&A.

Thank you. We will now begin a question and answer session. If you have a question for our speakers, please dial 01 on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before your turn to speak, you can dial 02 to cancel your question. If you're using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question. Okay, the first question is by . Yeah, hi.

Good afternoon. I have two questions, actually. One is you said that you target a size of an option of around 100 people by the end of this year. Would this mean holding revenues of around 50 million? And then secondly, you've been really active in France. How large is your ops team in France in particular and do you think you will grow it in France or in Italy and outside of Germany more than you do inside of Germany?

Thanks for the question. The addition to the operations team is pretty much really across Europe. We currently look to find people, especially in the Nordics, since we want to prepare for the growth there. We also have added a handful of people in Italy and a handful of people in France. And on the other hand, also look to the east, to Poland, where we have a lot of facilities. And we learned from the lockdown that it clearly makes sense to have operations people in the country. And therefore, we... reinforced the idea to grow the team steadily across Europe in all offices in all countries. And the second question was how large the operation team is in France. It's something around 10, and we want to grow it, and it will grow, because we signed the contract in May 2015.

And maybe adding a word there, which you said earlier, I think France is, for our business, with the people and the knowledge we have in the country, in my view, and as you know, I'm only on board since 2019, in the board here, a very, very good opportunity for the future growth. And I think we have had quite a comeback in 2020 in France. which we want to stabilize and make it a success now. So this is a very important market for me in 2020 and 2021.

And regarding the question, what do you expect for complying revenue in the holding based on the growth of the team? It will be something around 45 million.

Okay, perfect. Thanks to you both.

As a reminder, 0-1 if you want to ask a question. Currently there are no further questions.

So I hand back to you for the closing. Well, then, thank you very much for the participation today.

We will stay in touch with one or the other line. You will hear from us soon. and I'm happy to host you today together with Mark. Stay safe, stay healthy, and hopefully the majority of you guys we can meet shortly in person after overcoming the pandemic situation. Thank you very much.

Take care. Bye-bye. Ladies and gentlemen, thank you for your attendance. This call is being considered. You may disconnect.