Mutares SE & Co. KGaA

Good afternoon everyone and welcome to the Mutaris earnings call for the full year 2023. On the call today, the CEO Robin Lyke and the CFO Mark Friedrich will present the results and most relevant events of the full year 2023. After the presentation, they will be available to answer your questions. The presentation shown is available on the Mutaris website after the call. Before we start, I would like to remind you that this presentation contains forward-looking statements, including projections which may not develop as currently expected. I therefore kindly ask you to take note of the precautionary warning about forward-looking statements that is included in the materials on the website. Now, let me hand over to Robin Lyke.

Yes, good afternoon, dear shareholder. Dear Bondholder, my name is Robin Lyke, and I'm the founder, the CEO, and the main shareholder of Mutaris Group. And today we are very happy that we can present you a very successful 2023. And before we start into our presentation, I would like to explain again what is Mutaris really doing. So when we started this business 15 years ago, We wanted to go to big corporates and ask these big corporates, do you have assets that are underperforming? For the key strengths of Mutaris, what we are doing is that we enter with an own team into these companies. And this is our DNA. Our DNA is that we want to come into companies of big corporates, half out of big corporates, which are not performing. And then to these companies, we enter with an own team. And the team takes over a key management position. Can be a CEO position, can be a production manager, can be a sales manager, can be a controller. And that's what we are doing. So you see here the landscape where we are today. So we have 11 European offices, but we have also now an office that we plan in Chicago. And we also talk about India now. So we want to be known as guys who know how to do it. So we like to have the saying, first in mind, first in choice. When a big corporate decides to exit a company, or to close down a production site, we think if we want to go to them and tell them it's always better before you decide to close down a plant, to sell the plant to Mutaris, to sell the company to Mutaris. First in mind, first in choice, this should be Mutaris. So in which companies do we invest? The first segment that we do invest in is Motiv. Automotives are suppliers for BMW, for Mercedes, for Stellantis, so worldwide OEMs that we are supplying from our automotive subsidiaries. The next company, and that's based here in Germany in the beginning, so it's a very engineering-driven company, so we have many engineers on board. This is our sector, engineering and technology, machine tooling. We have a lot of machine tooling guys in our team. The third sector is the service business, where we do service business. And lastly, we just opened up a new sector, which is retail and food. And the target company that we want to buy is a company which should have like 100 million to 750 million in sales. And we want to be known as the guys who can do the turnaround. So how are we structured as a group? So today we talk about 250 people. Out of this 250 people, more than 150 are operational consultants. And when we acquire these companies, we send our own consultants into these companies. And by this, we do generate already today a consulting income of 10 million euros. And this is important for us because this is a resilient business model. This is a consulting business. And as we want to grow our business, this number of consultants will as well grow. The second source of profit is when a company turns around, they can pay us dividends. So we have this consulting income, then we have dividends, and the third column that we have is exit proceeds. And when we were sitting together in 2008, 18, so 10 years after we have started with this Motaris adventure. And at that time, here you see the figures of 2020, but in 2018, we had three years in a row, 1 billion turnover and 20 million net income. And then we said, how can we grow this business? And in 2018, we decided until 2028, this company should have a 10 billion turnover and a 200 million net profit. And we are very happy and grateful that you can announce that even today we are talking about a 5 billion euro turnover company and a 100 million net profit company. And this net profit that we talk about is composed out of these three pillars. Consulting income, dividends and exit proceeds. And as you can see here, we want now to have new targets. And you see that we also have new targets when it comes for you shareholders and also to the dividend. So we had before, we had a minimum dividend of one euro. and base dividend. And now we talk about a two euros dividend that we want to pay to our shareholders each year. And this year, as it was a very successful year, we decided to go for 225 in dividend. So we want to let participate all the players, which are all the stakeholders, which are involved in this Motaris story. So how do we generate our profit again? And we clustered all our portfolio into four different sectors. The first sector is acquisition phase. So the company is cash losing. And what we in general do, we go to the seller, which should be a big corporate, and we ask the seller to give us a strong balance sheet. This is the start of the Mutaris journey. So we ask them, can you give us funds that we can do the turnaround and this is cheaper for you big corporate then it closed down and it is cheaper for you then do it by yourself for in many cases these big corporates have tried already they've sent external consultants in they tried everything but it didn't work out and then our secret starts why is our what is our usp it's an intrapreneurship And we enter them with our own teams into the acquisition phase. So we have a cash out for a purchase price. But then we have a cash in for day one. We send our consultants in. The second time is then the realignment phase. So the team is already in and we bring back the company to break even. In general, we buy companies, let's assume 100 million euros in sales, but 10 million of losses. And we get then from the seller, in many cases, a balance sheet, which allows us to have like 12, 18 months until the company is cashflow positive again. That's the time which we call realignment. And then we come to an optimization stage. In this stage, optimization, we think about how can we develop sales? Can we buy maybe another company to enter a new market? Do we have the product which we need? What can we do to grow the business? Optimization stage, in many cases, then we take our consultants out and bring them in the new challenge into a new company. And then it comes to harvesting. Harvesting a time when we can take dividends when we get exit proceeds So this is a life cycle of Mutaris and over all of these life cycles. We said on holding level We wanted to achieve 100 million. That's what we promised you to the shareholders And that's what we delivered over the last years. We over over delivered on our own promises And here you have an overview about our portfolio and And you see automotive engineering and technology, goods and services and retail and food. And I would like to name some of the companies to give you some flavor what we are doing. So we talk about Steyr Motors. So we sent our team in and the team, they were doing their engines for special vehicles. And the quality was bad. The pricing was not okay. We had tough times before it was COVID. Then there was a raw material price increase. And, um, and when we entered the company has decided to go into different kinds of products, which were not needed by the market. And then we concentrate our product portfolio. And in the beginning, in many cases, we have to bring the costs down. So we had also to, to talk to our employees very openly and tell them he, in this case, it's too expensive. We need to take out people. That's what no one likes to do to reduce overhead costs. But in this case, it was necessary. And then we went to our customer and our customer even didn't want to see us. So we scheduled a dinner before we had the operational meeting in the morning. And the customer didn't want to show up for they were really unsatisfied with the quality and the delivery of our product. And then in this evening, we listened and we tried to understand what is really your issue. And then we assured them that we will be able to produce the quality that they need, that we will invest into the R&D facilities. And then we achieved to bring a company which was cash losing today to a company which has 20% EBITDA and is running quite profitable. Maybe another company that I want to name is Conexus. Connexus is a company in the high voltage, which we acquired in Italy from Sirti Group. And then we put in Marco and other individuals. We were then turning around the business, which is in this energy market. And just yesterday, we announced that we bought now from Altel, a company in Poland, our first Polish transaction that we did. I'm very happy for Dominik and the team there, but we are able to grow now this business, which is running quite profitable with a 10% EBITDA margin. And then you see retail and food, the last sector that we just opened where we bought several companies also last year and which are also quite development. For us, when we buy these companies, for us it's important that we do not buy only in Germany. That's why we are really a worldwide player today. But we don't want to be dependent on risks, which are only on one market or only on one stage. So we buy early cycle, we buy late cycle and we buy non-cyclical businesses. This gives us a balance when it comes to the operational risk of the market. Some key figures, maybe the companies, we are quite an active fund. So we bought 16 companies last year. in all over the sector. So we bought, for example, in the dairy industry where we produce milk, butter, cheese, and sell it mainly in Germany today. Then we bought many other companies, as you can see here, some really substantial brands. So for example, we're now the owners for Peugeot Motorcycles, a two-wheeler business. And we also increased our bond, but you can see the bond is now a 250 million bond in total. And all of this with a new dividend strategy, with the achievement of the promises that we delivered really on our promises, we were able to be now included in the SDAX, which is for the team. Of course, a very nice appreciation. And we were also able to sell seven companies last year. And here, what influenced, of course, our results of last year is Special Multi-Product. So Special Multi-Product was a company bought in the UK. And we sent our team and we sent Ran, an individual, to run the business together with many others, Thomas in the finance department, Dario and the sales department. So we had a very strong sales team there, but we were able to bring the quality back on track. This is what we are doing. So we are producing their special steels, which are used in the aviation industry and which is also used in the nuclear power plants. And the company, when we bought it, was a 20 million company with more than 10 million of losses, 20 million pensions sitting on the balance sheet. And when we entered, everyone, especially my supervisor board, told me, Mr. Light don't buy this company. But then we looked at the markets and we knew that aviation industry, this is an industry which can come. We were quite advanced in improving the quality for the turbine. Rolls-Royce was one of our biggest customers. And then we sold this company to an Italian strategic for 160 million. More than 160 million we were able to have as exit proceeds. And this was also the reason why we had these nice results last year for the exits. One of the three pillars very nicely worked out last year with Ivo and the British team, we were able to generate this high exit proceeds. And very happy that in our market segment, especially in the UK, we were awarded to have the best turnaround in the UK. Another company where I was on the 100 Days meeting this week. We flew in there on Tuesday morning. This is a company called IFASEC. IFASEC, a company that we bought in Portugal. And they are doing transformers, but they are mainly responsible for the electric diversification and the distribution of electronics in Portugal. And this was a state-owned company, but as you can see here, huge losses due to inefficient projects that they have taken. And our team there is now concentrating on the projects for future. For example, we do the electronic charging systems for the highways. And we do here also the transformers for the nuclear power plants. And what we did here in the beginning, we concentrated on the main issues. What is the core of our business? And from this basis on, we have now a very strong pipeline in place. So auto intake was substantial. And we are very confident that this will be one of the crowns of Mutaris in the years to come. For we see a very good auto intake. We see a very good backlog. And we see that the turnaround plan that we did there is quite substantial. So what is key? What is key is in all of these cases that I present to you is that we go there with our own team. All of this is only the team who can make the turnaround. And these are not external consultants. This is us. This is a very direct approach. So as we take over in many cases the key management positions, it is not an external passive fund. We are the active investors. We are the guys who enter into the companies. And we do the turnaround internally. by ourselves. And by this, I would like to hand over to Mark. Thank you.

Thanks, Robin. So starting the financials with, again, the overview of the financials and the development over the last three years. And what you see here pretty much is that we continued our way of growing the Mutaris group in a very decent pace of approximately 25% to 30% each year in revenues, reaching $4.7 billion in 2023. And more important for us also, we see the development of the adjusted EBITDA that improved year by year, even though we added a lot of loss making, by nature loss making entities and portfolio companies to the group, we still were able to improve the adjusted EBITDA to a positive level of full year to 3.5 million, showing the development, the underlying development in the portfolio towards a positive contribution here, and we will see it in the segments in more detail where we perform really well and where we have added a lot of loss-making entities and can work on it in the next couple of months. The financials of Mutaris Holding here also pretty much follow always the group financials with revenues, so consigning revenues reaching more than 100 million. And the run rate is approximately 120, based on the development of the full group here. And the net reside, Robin already explained it, quite dominated by the biggest exit in Mutaira's history of S&P, reaching also more than 100 million. For fiscal year 2024, we already guided here for approximately 6 billion in group revenues, and again, and net income of 1.8% to 2.2% residing in the 108 to 132 million of net income of the holding. The development quarter by quarter reveals a bit that it fluctuates more than we would like to see it here. You see that the development, especially in goods and services, is the most stable when it comes to positive contribution here. Also compared to last year, still pretty much doubled. And on the other hand here, we see the biggest turnaround in automotive and mobility. We'll explain it in more detail on the next page, what we did here, which is a substantial turnaround. but still a way to go. Coming to the details of the segments, starting with the biggest segments in terms of revenue, almost 2 billion here. You see that we were actually quite active in the segment, but still have only five groups. On the right side, you see that we added more than 700 million of revenues through acquisitions. And that's mainly due to the add-on acquisitions that we did for Ferro United and Hilo Group at the end of the year, because we strongly believe that in this segment, size matters. And that's why we have invested so much in the buildup of Ferro United that combines more than a billion of revenues, run rate, And we strongly believe that this is the right way forward. Also, Hyla Group was pretty much substantially increased in the end of 2023 with the two add-ons that we did here. On the other hand, we saw some really, really good development in the transformation and restructuring of SFC and LMS, both part of the Armanios Group. And therefore, we ended here with an adjusted EVDA 3.3 million compared to minus 49 in 2022. Moving on to engineering and technology, a segment where we have added quite a lot and sold quite a lot over the last 18 months. You see it in the first bullet point here on the right side, that we have acquired a lot of entities, NEM, Guaspor, SMP, and so on, and divested also a lot. Therefore, quite a mix here, quite a movement in the segment, and quite an interesting segment, because here are a couple of entities that we have here in the segment that are really on a good way, namely here, the NEM group, also Guascua, quite improved now in the beginning of 2024. And Robin also explained already EFASEC and Steyr, especially EFASEC quite heavily influenced the adjusted EVTA in Q4, so quite 1st of November, because we had to restart pretty much the production was quite empty The amounts here are quite substantial. What you see here pretty much on the left as adjusted EBITDA for full year is almost only FSA. Then goods and services, the best performing segment, quite a broad range here of different portfolio companies. You see that the adjusted EBITDA almost doubled. And here we see or saw in 2023, some decent development at TerraNorth, Rigoscania already sold here, but also Gunter. And are quite positive when it comes to the development of a handful of other companies that we added to the segment, namely here, GoCollective, but also Redo, Conexus, and again, the Terranog Group. Last segment, the one that we newly formed here out of goods and services, the retail and food segment, where we have with La Pere, Keeper, Fasana, three companies that we already had in the goods and services segment. And you see the three acquisitions that we did here that contributed only a bit to the overall revenue and segment because the acquisitions were closed mostly in the second half of the year. And we saw here still some headwind in the market for LaPierre, and on the other hand, a good development at Kieper and Fasana and a promising development, especially at Gläserne Molkerei and Prenatal. Coming to the last page again, the current... Lifecycle, we see actually a bit like always, it looks quite sound and you see pretty much that we did a lot of acquisitions here. That's what you see in realignment, lots of companies combining 2.2 million, a billion of revenues and substantially negative in 2023. And we will take out here a couple of entities and move them on to optimization in the Q1 presentation. Because optimization here also a lot of pretty much well-developing entities, 1.7 billion of revenues here. You see already here the newly formed Hylo Group in there and the combination of NEM and Baikadur. Profitability reached a positive level. And then in the end, we have just a handful of assets in harvesting. Most likely also for Q1, we will hear see a bit of change, adding a couple of companies and having here less revenues than last year because we sold part of the Dongus Group, but again, a quite positive adjusted EBITDA due to the performance of the companies that you see here. And with it, I already hand back to Robin.

Yeah, thank you, Marc. For me also, this is... This is a moment where we can say a big thank you to Mark. I mean, Mark already 12 years with the company, since nine years as CFO. And when you have a company which is only a billion, and today we talk about a five billion company, it's a lot of work when it comes to year-end accounts. And Mark, what you did here, together with your team, Simon, and many more, it's really incredibly strong. And thanks a lot for all of this work, for what we are doing. And that's... Maybe for you as a shareholder, we are really the guys who are on the ground. We fly into these companies. We take over responsibility. And what we have shown, and this is for you as shareholders or bondholders, is a very attractive access to the private equity market. What we are doing is private equity, but based on a family business, based on a business which is still in the hands of entrepreneurs. And our dividend strategy speaks for itself. We were always increasing our dividend. We had several years now, one Euro, then 150, then 175. And this year it tops with 225. I think the development of the share speaks for itself. We want to be super high transparent. This is also important. So we buy a lot of companies also from state. So as mentioned, IFASEC, for example. from the Portuguese state where the finance minister of Portugal, he told me before we acquired Mr. Light, you are now in charge for so many employees. I help you. I give you a strong balance sheet. I give you even a cash dowry. But what is for me important is that you are now in charge, but you are quicker. You are more entrepreneur. You will make it happen. And of course we are, we are long-term substantially orientated. So this is for us, I think, key and for you as investors, as bondholders, that we believe that we have a resilient business model, which is growing. As mentioned, we want to be the really worldwide player. Before I always said I wanted to be, or we wanted to be the German number one in private equity. And we were awarded by Focus Money three times now in a row to be the best private equity company in Germany. But what our target is, of course, is that we are the worldwide player when it comes to development, to growth in both in sales and number of companies that we acquire and in profitability on holding level. So what we want to report in future, and that's what we did in the last years, we want to show what is our net result on holding level. And this result of 100 million that we achieved now, this was a dream many years ago, and now we have new dreams. And I want you, of course, to follow us in this development. As I can show you here, we have already set a target for this year. With three acquisitions at the beginning of the year, we think that we will be able to increase our sales number, but we also want to increase our result level, net result and holding level, which is based on the three pillars, which is based on consulting on dividend and exit proceeds. And our long-term target when it comes to the dividend, we already mentioned that we want to pay out a minimum of two euros in the future. And we are quite positive that this is achievable. Thanks a lot for your attendance. And by this, I would like to hand over to the operator.

Thank you very much. Ladies and gentlemen, if you would like to ask a question, please press nine and star on your telephone keypad. In case you wish to withdraw your question, please press nine and star again. Please press nine and star now to register for a question. And the first question comes from Marie-Therese Griebner from Hauken Aufheuser Investment Banking. Over to you.

Good afternoon, Robin. Good afternoon, Marc. Congrats on this fantastic year, first of all. If I may, I have a few questions that I would like to ask one after the other, because otherwise we all get lost. So do you hear me, first of all?

No, it's very difficult to hear you.

Oh, okay. Sorry about that. Now, can you hear me better?

Very interrupted.

Okay, I hope it's better now. Hello? Now it's better. Now it's better, okay. Yeah, my first question pertains to the guidance you're giving from Medeco. Can you give us at least an indication of the breakdown between dividends, the consulting... Proceeds you are budgeting in that figure of the closing guidance? Nothing of a level for the guidance, please.

Yeah. Marie-Therese, it was so interrupted, so I repeat what I understood. So you were asking for a bit more color on the input factors for the guidance of the holding, right? Exactly, yes. The breakdown, if you can give us an indication, yes. Yeah, yeah, yeah. All right, so the revenue that we foresee for the holding will be around 120 million. And based on this, we came to the net result. And the underlying assumption here is that we have net proceeds of more than 100 million from exits. And therefore, to start into the year with Figos-Caña, where we have already more than 50 million, was quite good. So we are halfway there and have started a handful of other exit processes so that we are quite confident with communicating this guidance that we have here in the presentation.

Thank you very much. That was clear. Can you give us maybe, you said that consulting revenues were 100 million into one, I think, at the end of last year. Is this Is this the amount you should assume for 24 or should it be a bit more?

For 24, you should assume 120. Okay.

Okay, thank you. And then on the... maybe upcoming exits or companies that you've been trying at least to sell in the past? For example, Lavochette, is there any update on that one? And also, can you comment anything on any pending exits, maybe in Q1 or Q2?

Actually, we don't want to go to the detail here. Well, this is confidential information, but you can assume that the companies which are harvesting, we are checking regularly whether we are able to have a good buyer. And we are not in a situation where we are like a typical fund where there's an exit pressure. We try to sell the companies as we are a stock listed company when we believe there's a rise price.

Okay, Arne. And then last but not least, if you can comment on any upcoming deal activity in China and the U.S. where you recently established a presence. And that would be it from my side. Thank you.

Yeah, so we are looking in the U.S. into different companies. There's one automotive supplier, turnover like 200 million, cash losing to a typical company. mutaris business model and we are also looking uh in in china to an automotive supplier um so in both countries i think that we are um that we will have at least one deal um to be announced in uh in this year okay thanks a lot uh these are my questions thank you very much

Thank you. And at the moment, there are no further questions. So if you have any additional questions, please press 9 and star now on your telephone keypad. 9 and star for any additional questions. As there are no further questions, I give the floor back to Robin Lyke and Mark Friedrich. Over to you.

Yeah, this is today, of course, the time to say thank you to our employees. Worldwide, we have achieved now a fantastic result. We are growing and this is all only possible due to your immense dedication to the companies. Thanks a lot. Thanks for you as shareholders and as bondholders for your trust. We promised and we delivered. And that's the target for us. We have ambitious targets and we want to grow this business. And I hope that you stay with us and that you help us to fulfill our targets. Thanks a lot and speak to you soon. Thank you. Bye-bye.