TÜV SÜD has been bringing together people, technology and the environment since its formation 150 years ago – with a long-term perspective, in a sustainable and value adding manner.
TÜV SÜD’s range of services covers certification and testing, inspection, auditing and system certification, knowledge services and training. We operate in the TIC (Testing, Inspection, Certification) market as a technical services provider. Our dedicated and responsible specialists with wide-ranging industry expertise develop made-to-measure solutions – for retail customers as well as for industry, trade and government. As consultants, we optimize technology, systems and know-how, while focusing on the entire value added chain.
A new management structure was implemented in 2017. It aims to position TÜV SÜD as an agile, efficient and transparently managed organization in a sustainable way. As of May 1, 2017, the three-person Board of Management has an international member for the first time. The function of Chief Operating Officer (COO) was created, in addition to the CEO and CFO, thereby centralizing responsibility for the operative business.
At the same time, in order to strengthen the position of the divisions, a Leadership Council was established to complement and report directly to the Board of Management. The CEOs of the divisions and key regions are represented in this new body in addition to the Board of Management.
The members of the Leadership Council join forces to drive forward overarching themes such as strategy, employee development, innovation and digitization. In this way, new impetus is constantly being generated in order to meet the challenges we face, which arise as a result of changing framework conditions and, in particular, the digital transformation of the economy and society.
In this context, we also adjusted the allocation of our services to the three segments INDUSTRY, MOBILITY and CERTIFICATION.
The INDUSTRY Segment includes, as before, the Industry Service and Real Estate & Infrastructure Divisions. The MOBILITY Segment includes the Auto Service Division and the Life Service unit, which had not been allocated to any segment previously. We have bundled our expertise in cyber security, training and management certification in the new Business Assurance Division. This belongs to the CERTIFICATION Segment, as does the Product Service Division.
The regional structure remains largely the same, although the Middle East & Africa sub-region is now managed under ASIA. The prior-year comparative figures have been adjusted to the new divisional and regional structure to improve comparability.
TÜV SÜD continues to be managed as a matrix organization. The divisions allocated to the three segments are responsible for the implementation of the global strategy. The regions are responsible for the local business development.
Operating in more than 50 countries around the world, more than 24,000 employees at over 1,000 locations on five continents increase safety and add value for our customers. In globally networked competence centers, we make the latest knowledge available to our customers worldwide.
We are working systematically on expanding our international presence in order to support our customers with services. At the same time, we are laying the foundation for the continued profitable growth of our Group, enabling us to be not only a reliable, but also a strong partner in the future.
Our strategy is aimed at sustainable growth and internationalization with and for our customers. It is derived from technological trends, customer requirements and regulatory framework conditions.
Sustainable action geared to protecting people and the environment has always been set out in TÜV SÜD’s goals. This guiding principle has shaped the company since its foundation over 150 years ago. From the first environment-related assessments at the end of the 19th century to the countless audits and certifications that we currently offer in areas such as environmental management, energy efficiency, renewable energy or electromobility – when it comes to protecting people and the environment TÜV SÜD is almost always the first port of call.
TÜV SÜD also applies stringent standards to its own actions. Absolute integrity and strict compliance with laws and standards are absolutely essential for a technical service provider. A comprehensive compliance management within the Group ensures that all our employees always meet the high standards that our customers and the public expect from us.
TÜV SÜD’s growth is driven by our employees around the world who are available for our customers around the globe. They might all have different nationalities and belong to different cultures, they might all be of different age, with different lifestyles and world views — but they all contribute to TÜV SÜD’s success with their skills and knowledge. By signing the Diversity Charter in July 2017, TÜV SÜD has committed itself to promoting pluralism and making it part of its corporate culture.
TÜV SÜD stands for independence and impartiality, which are ensured by the unique corporate structure of our Group. In its capacity as management holding company, the parent company, TÜV SÜD AG with registered offices in Munich, manages its subsidiaries around the world. The beneficial owners of TÜV SÜD shares are TÜV SÜD e.V., Munich, and the TÜV SÜD Foundation, Munich. Both have transferred their shares to the independent TÜV SÜD Gesellschafterausschuss GbR, a shareholder committee with registered offices in Munich. The purpose of the civil law association is to hold and manage this shareholding under stock corporation law.
The governing bodies of TÜV SÜD e.V., the TÜV SÜD Foundation and TÜV SÜD Gesellschafterausschuss GbR, are largely independent of the supervisory bodies of TÜV SÜD AG. This ensures the independence of the bodies in accordance with the German Corporate Governance Code.
The TÜV SÜD Foundation publishes its own report annually.
Our proven Strategy 2020 has enabled us to constantly increase the value of TÜV SÜD over the past years. The focus on the two dimensions of action “growth” and “efficiency” remained unchanged this fiscal year. The market for testing and certification services continues to offer TÜV SÜD many opportunities to grow and increase our revenue volume organically. In addition, we are enhancing our portfolio by acquiring companies in the sectors and regions of relevance for us.
In the coming years, TÜV SÜD will see promising market opportunities arising from further internationalization, digitization and technical developments.
TÜV SÜD faces two major challenges. Existing business needs to be transformed and adapted to changing market situations, customer needs and new framework conditions, for example in the area of standards and regulations. This also includes expanding the international business in the focus markets, active portfolio management and achieving greater efficiency through the use of digital technologies. Overall, we intend to and must expand and complement our existing strengths in order to be a strong partner for our customers and to generate further growth.
At the same time, we intend to exploit any new potential that presents itself through digital services, innovation and the corresponding business models. The aim is to systematically generate customer benefits in the individual divisions from new technological possibilities. This requires us to develop the relevant capabilities within the company. For this reason we have launched a group-wide training program on “Digital Readiness” in order to ensure that we are in position to quickly and flexibly use the opportunities offered by digitization. It is also important to continue expanding essential strategic capabilities and our portfolio in the digital area. Our investment in Uniscon universal identity control GmbH (Uniscon), Munich, enhances our digital portfolio in the area of highly secure cloud solutions. This investment enables us to develop and offer new business models and services in the area of secure data handling. This is a major component of the digital positioning of TÜV SÜD.
In the year 2017 we also started refining our strategy up to 2025. This involves defining strategic future states, thrusts, initiatives and plans on both group and company levels by mid-2018. In this way, we intend to set the course for the future of TÜV SÜD.
FUNDING INNOVATION AND DIGITAL TRANSFORMATION
Active innovation management
Technological change has driven our business since TÜV SÜD’s foundation over 150 years ago. If we stand for the security of technology, then we must be at the forefront of technological change ourselves. At the same time, we also want to use every possibility in our own company in order to work more efficiently and to offer our customers a high level of service.
We have encouraged active innovation management for many years. In fiscal year 2017 centralized innovation management coordinated investments of € 17.1 million (prior year: € 9.4 million) in research and development.
Promoting innovation quickly and purposefully
The targeted promotion of innovation funding and a simplified innovation process form the basis of rapid and effective implementation of clearly market-focused innovation projects. TÜV SÜD’s focus is on the implementation of pilot projects with customers and partners.
In fiscal year 2017 seven innovation projects were supported by the Corporate Innovation Fund in addition to numerous projects for the innovative development of existing services in the operating business. The individual projects are initiated and implemented locally by divisions or regions and supported by central innovation management.
The projects’ focus are on the digital transformation of the core business and new, technology-driven business models. This helps create, for example, new services in the area of additive manufacturing, the constant monitoring of facilities and the inspection of wind turbines using drones. Synergy effects are successfully exploited and project implementation accelerated as a result of overarching planning and coordination of innovation projects and the regular exchange of information between all project managers.
Expansion of digitization
Technological progress is still characterized by advancing digitization in almost every industry. TÜV SÜD recognized this development at an early stage and, in the year 2016, established the Cyber Security unit and opened a Center of Excellence (CoE) for Digital Services in Singapore. With TÜV SÜD Digital Service GmbH and the official opening of an additional CoE for Digital Services in Munich we further increased capacity for digitization topics in the fiscal year.
TÜV SÜD Digital Service GmbH, as a start-up in the Group, will develop new solutions and business models and support the Group’s operative units to develop their services further. The CoE in Singapore focuses above all on the rapid implementation of pilot projects in Singapore’s highly-innovative environment, whereas the competence center in Munich develops digital leading technologies relevant to TÜV SÜD and implements them in group-wide initiatives.
The framework for this is a threefold strategy that defines TÜV SÜD’s approach to digitization:
• We combine our technology and sector analysis on the topic of advanced analytics to offer our customers new or expanded services. Pilot projects have already been launched in the area of smart lifts, the optimization of wind power plants as well as in the predictive maintenance of conventional power plants. A partner ecosystem will also be created through targeted collaboration projects in the next few years, from which our customers will enjoy the benefits.
• With our comprehensive range of services for cyber security, we want to be a trustworthy partner in all aspects of IT security, above all for our small and medium-sized business customers. The focus is, among other things, on certification services for the Internet of Things, device and version management for factory automation as well as penetration and security testing for industrial applications. At the same time, we are also looking for possibilities for the targeted expansion of our portfolio in this area.
• We completed such a targeted expansion of our capabilities in the area of highly secure cloud solutions with our investment in Uniscon, the third point of our threefold strategy, with which we are positioning ourselves at the center of digital transformation.
We want to use digital transformation to offer new and improved services to our customers while at the same time increasing the efficiency of our own processes. In the fiscal year 2017, the highly automated driving (HAD) initiative was launched to position us as a technology leader in a new field of business and to position our traditional business in the field of vehicle inspections and homologation for the future. TÜV SÜD experts monitored the approval process for Germany’s first automated bus shuttle in the Bavarian town Bad Birnbach, which went into operation in the summer of 2017.
TÜV SÜD recently also became the partner of UnternehmerTUM’s Digital Hub Mobility, the Center for Innovation and Business Creation at Technical University of Munich (TUM). Participation in the “Digital Project School” is one of the offers. Together with experts from other well-known companies in practice-based projects, TÜV SÜD employees can use new development methods to develop digital projects. Researchers from TUM support the work as scientific advisors.
TÜV SÜD will increasingly invest in technological development. Between the years 2017 and 2019 alone, a double-digit million figure will be invested in the development of new services relating to digitization.
In the reporting year, we established the new management structure, which will manage TÜV SÜD as an international and sustainable group even more efficiently and transparently in the future. Other focal points were the establishment of the digitization business worldwide, the intensified networking of our activities and the market launch of product innovations. By directly linking the key account management with the newly-appointed Leadership Council, we are pursuing our claim to be a competent, neutral and reliable partner for our customers.
In addition, we invested in selected focus countries in the INDUSTRY and CERTIFICATION Segments and successfully continued to streamline our corporate structure by merging companies.
Our services are in increasing demand worldwide. Although our business development in Europe is only to a minor extent dependent on the economic situation, the economic development does provide us with additional growth impetus. The economic momentum in the USA had a stimulating effect on business development there. Nevertheless, demand for services in the petrochemical industry remains at a low level. In Brazil, there were signs of a slight economic recovery, which slowed the decline in demand. In Asia, our business is developing steadily after economic growth in the emerging markets there had slowed in recent years.
The focus in the fiscal year was on expanding our existing business and exploiting the opportunities arising from the digital transformation for TÜV SÜD. The aim is to generate higher customer benefits from existing services and to develop innovative, future-oriented offers. An important element in this context is the range of renewable energies on offer.
In the fiscal year, TÜV SÜD was able to demonstrate its many years of experience with onshore and offshore wind energy in various contracts for technical due diligence reviews and the realization of wind farms, also in the international environment. In Taiwan, TÜV SÜD is intensifying its collaboration with research institutes and regulatory authorities to promote the expansion of offshore wind energy there. In Germany, our experts were involved in the construction supervision and testing of a natural electricity storage facility. The innovative power plant concept consists of four wind turbines and a pumped storage power plant.
Other innovative offerings such as predictive maintenance and plant inspections with drones have successfully passed the pilot phase and are now included in the service portfolio worldwide.
Thanks to our competence and experience in the field of non-destructive material testing, we have been awarded a multi-year testing project in Italy for large parts for power plant turbines using X-ray analysis.
TÜV SÜD’s range of services for the real estate industry covers the entire life cycle of a property. Since February 2017, sustainability assessment according to BREEAM (Building Research Establishment Environmental Assessment Method) and other green building standards have been bundled in the Advisory Institute for Simulation & Energy Efficiency of TÜV SÜD Advimo GmbH, Munich. In this way, customers receive comprehensive advice and digital planning of energy-efficient and sustainable buildings from a single source.
Building information modeling (BIM), i.e., the modeling of a digital twin building, as well as offers for networked building automation systems are further innovative products in our service portfolio. In the fiscal year, we were commissioned to provide BIM advice and support for the construction of a new chemical laboratory in Germany. We also created the energy concept and simulation for the new building of a meat factory.
In May 2017, we acquired the business of the Swedish company, MiW Rail Technology AB, Stockholm. The company offers, in particular, digital measurements of vehicle dynamics and the development of simulation tools. It enhances our existing range of services for rail transport with innovative digital services.
In the course of development work, we examined new types of trains for high-speed long-distance traffic in Switzerland in accordance with the harmonized European regulations and national Swiss requirements. The project was successful. A temporary operating permit has been granted and the vehicles will gradually begin operating in 2018.
In December 2017, the high speed rail link from Berlin to Munich went into operation. The line uses state-of-the-art electronic signaling technology and the new European train control system. TÜV SÜD experts were also heavily involved in the design and acceptance tests for train protection and signal box technology, traction power systems and tunnel equipment and hazard alarm systems.
In the UK, TÜV SÜD is investing more than ten million euros in the construction of a new Center of Excellence for underwater pipelines. The research and development center’s range of services is aimed in particular at the chemicals and petrochemicals industry. The project is supported by the Scottish Enterprise Fund.
Changes in local conditions in individual markets as well as planned disposals led to impairments on assets in 2017.
The continuing weakness of the Brazilian construction industry led to impairments on selected intangible assets from the acquisition of Bureau de Projetos e Consultoria Ltda., São Paulo. The corrective measures that have been initiated in the company so far were not able to compensate for the weak order situation for publicly funded infrastructure measures. The private sector investments stimulated by the government during the fiscal year have not yet reached the necessary volumes either.
In spring 2017, we sold our lift inspection business in South Africa, TUV SUD South Africa Real Estate Services (Pty) Ltd. (TUV SUD South Africa), Cape Town, and are now focusing our business development in this market on non-destructive testing.
We are concentrating our offering to the chemicals and petrochemicals industry as well as the process industry on our European core market. The sale of RCI Consultants Inc. (RCI), Houston (USA), after the reporting date resulted in an impairment of selected assets in the fiscal year 2017.
The Spanish TÜV SÜD ATISAE companies acquired in the prior year were more closely integrated into the TÜV SÜD Group in the year 2017. The integrative measures included, among other things, optimizing the structure of the shareholdings.
As part of the realignment of our management structure and the associated focus on our core competencies, the MOBILITY Segment was supplemented by the business of driving ability and medical-psychological examinations. The services provided by the Life Services unit, previously assigned to OTHER, now complement the segment’s range of services with safety-related services for vehicle drivers.
Digitization and the associated technological change are the driving force behind our core business with automobile-related services. In the fiscal year, TÜV SÜD accompanied various projects in the area of highly-automated driving. In addition to preparing expert opinions for the approval of a fully-automated passenger bus in Bad Birnbach, this also included the development of new test procedures for the safety of highly-automated vehicles in the PEGASUS project of the Federal Ministry of Economics.
For the optimal standardization of vehicle management processes, TÜV SÜD offers a comprehensive range of digital tools such as the creation of digital vehicle files or multilingual valuation reports.
The worldwide network of test laboratories is also an important component for TÜV SÜD in the field of electromobility. With the Dynamic Component Testing Laboratory (DYCOT) in the Czech Republic, TÜV SÜD supports the automotive industry with simulations and non-destructive testing of automotive components. The service portfolio also includes the testing of exhaust gas and airbags.
The TÜV SÜD Blue Box, a modular test center that is ready for use within one day, creates even greater customer proximity. In addition to the efficient roadworthiness test and exhaust gas analysis, the range of services offered by the mobile test center also includes experts’ evaluations and opinions. The Blue Box is now in use at six locations.
By entering into a cooperation agreement with the South Korean Environment Cooperation (K-eco), TÜV SÜD is creating the conditions for European automobile manufacturers to gain access to the South Korean market.
TÜV SÜD’s testing facilities for emission and consumption measurements as well as the engine and roller testing rigs in Heimsheim have been extensively expanded since fall 2017 and expanded to become the largest mobility laboratory in Europe. The laboratory already offers independent engine and exhaust-gas analyses. In the future, type approvals can also be carried out there in compliance with all international guidelines. Completion is scheduled for 2019.
The CERTIFICATION Segment was realigned in the fiscal year to provide a larger platform for the TÜV SÜD Group’s digitization services business. The former Management Service Division, the Cyber Security unit and the Academy business, which was previously under OTHER, were combined in the Business Assurance Division. The Product Service Division remains unchanged.
In April 2017, the second Center of Excellence (CoE) for Digital Services in addition to Singapore was opened in Munich. The main focus of the CoE and TÜV SÜD Digital Service GmbH is on the development of new services and business models in the fields of data analysis, functional reliability of intelligent systems and industrial IT security.
In May 2017, we expanded our network of laboratories for electromagnetic compatibility (EMC) in the USA by acquiring Advanced Compliance Solutions ACS Inc., Atlanta. We have further expanded our product range for the US market and are even better able to meet the demand for EMC services. At the same time, we were able to supplement our range of services with various accreditations, including for radio and telecommunications.
The internationally-oriented LabExcellence Program was successfully continued to promote the transfer of knowledge and the exchange of innovative test methods as well as process optimization in our laboratories worldwide.
At the end of July 2017, TÜV SÜD invested in Uniscon. The company offers highly secure cloud solutions for data processing. The product range enables TÜV SÜD to position itself as a neutral operator of a secure platform for handling sensitive data.
TÜV SÜD has been handling the personnel certification of the Swiss project management Hermes 5 since 2013 on behalf of the Swiss Federal IT steering unit (ISB). In November of the fiscal year, the contract was extended until 2023.
We also recognized impairment losses on intangible assets at the Brazilian company TÜV SÜD SFDK Laboratório de Análise de Produtos EIRELI (SFDK), São Paulo, to reflect structural weaknesses of the market for food and health products, described as a risk in the prior year, which have now occurred.
We saw organic growth in the fiscal year. The cyclical upswing in most markets resulted in additional stimulus. Development was impacted only by the strong euro, fundamental policy decisions such as the nuclear phase-out in South Korea, and sluggish recovery of the Brazilian economy.
Development compared to prior period
Development compared to prior period
|up to €210 million |
mid-single-digit percentage range
|EBIT margin||8.5 %||high-single-percentage|
|EVA||€80.9 million||€75 – 85 million||€80.7 million|
Development compared to prior period
Our expectations regarding business development are derived from our existing services. They are defined as organic growth. All segments saw positive revenue development. The INDUSTRY Segment fell short of the forecast growth rate for revenue and EBIT. The EBIT margin was within the expected high single-digit percentage range. The MOBILITY Segment’s revenue and EBIT growth was within the expected range; the EBIT margin outperformed targets. The CERTIFICATION Segment met all expectations with the exception of revenue growth.
At € 201.3 million, earnings before interest, before other financial result and before income tax, but after income from participations (EBIT) met the expected corridor. At 8.3%, the EBIT margin was within the expected range, but lower than the prior-year EBIT margin (8.5%).
The EBIT development was positively influenced by revenue growth and lower personnel expenses in relation to revenue increase. Higher other expenses had a negative impact. Non-recurring impairments of goodwill and intangible assets were again necessary but remained below the prior-year level. The effect from the planned sale of the US-based RCI is also included here.
Adjusted EBIT, which is better suited for a multi-year comparison with other companies in the industry, at €216.7million is 7.4% above the prior-year figure (€ 201.8 million). At 8.9%, the adjusted EBIT margin is in the expected forecast range and is 0.3 percentage points above the prior year figure.
Consolidated earnings before taxes (EBT) rose by 4.2% compared to the prior year, thus matching our expectations. In the prior year, EBT was positively impacted by the non-recurring write-up of the existing stake held in the Spanish TÜV SÜD ATISAE, S.A.U (TÜV SÜD ATISAE), Madrid, by around € 11 million which was recognized through profit and loss. Adjusted EBT also attained the expected figure. The adjusted EBT margin saw an increase to 8.5% (prior year: 7.9%).
The consolidated result after taxes reached a new record of € 138.8 million (prior year: € 130.5 million).
At € 80.7 million, EVA for the Group is slightly below the prior-year level (€ 80.9 million) but within the range we expected. This key indicator is calculated from the net operating profit after tax (NOPAT) of € 145.4 million less the Group’s cost of capital, yielded by the product of average capital employed (€ 924.8 million) and WACC of 7.0%. NOPAT was positively influenced by the development of business from the MOBILITY and CERTIFICATION Segments. Starting from a prior-year level that was already high, the average capital employed increased again, resulting in higher capital costs. A key factor here was the first-time consolidation in the prior year of TÜV SÜD ATISAE and ATISAE de Castilla y León, S.A.U. (ATICAL), Miranda de Ebro, with regard to operating assets and working capital.
The average increase in the number of employees (full-time equivalents) from 21,738 to 22,117 is below the expected range after selective personnel measures were necessary abroad in order to reflect the development of local businesses.
Planning and management of the TÜV SÜD Group is based on IFRS. The key financial performance indicators defined for the TÜV SÜD Group are not relevant for TÜV SÜD AG in its function as a management holding company and are therefore not reliable.
Our global presence, expertise in our core areas as well as our innovative service portfolio guarantee stable growth. In this way, in the fiscal year 2017, revenue growth was characterized solely by the organic growth of our existing companies. Despite negative exchange rate effects, we exceeded our projected revenue target of up to €2.4 billion.
All segments again made a positive contribution to consolidated revenue growth. With the exception of the ASIA Region, the geographic segments, including our core market of Germany, saw positive revenue development.
Both EBIT and adjusted EBIT developed positively. At 8.3%, the EBIT margin declined in comparison to the prior year (prior year: 8.5%). The adjusted EBIT margin stands at 8.9% (prior year: 8.6%). EBIT development was significantly impacted by the higher other expenses – including those relating to innovation promotion – and lower income from participations compared to the prior year. By contrast, the proportional increase in purchased external services and the disproportionately low rise in personnel expenses compared to revenue had a positive effect. Adjusted for one-time effects, earnings before taxes (EBT) developed positively, as did the adjusted EBT margin, which increased by 0.6 percentage points to 8.5% (prior year: 7.9%).
The investment in Uniscon, the extensive investment projects and the ongoing promotion of innovation as well as the one-off additions to the pension assets were financed from the cash flow from operating activities. TÜV SÜD has comfortable liquidity, which is secure for the long term thanks to our good credit ratings and the existing syndicated credit line.
We offer high-quality, innovative and sophisticated services worldwide across nearly all industries while maintaining impartiality and objectivity. To be able to respond to changes in market expectations, this objective is regularly reviewed and updated as and when necessary. In this way, we want to ensure the positive business development of TÜV SÜD now and in the future.
Business development in terms of revenue and profit met our expectations.
The prior-year information presented below has already been adjusted to the realignment of the segments and regions to improve comparability.
The three segments, INDUSTRY, MOBILITY and CERTIFICATION, continued their growth trajectory in the fiscal year 2017.
The 8,033 employees (on average) of the INDUSTRY Segment generated revenue of € 961.3 million. This is equivalent to 39.6% of consolidated revenue. Revenue in the segment barely changed in comparison to the prior year (up € 0.3 million), thus falling short of expectations.
The Industry Service Division recorded a slight decline (down 1.1%) in revenue in the fiscal year, but remained the division with the highest volume of revenue within the segment, accounting for 61.2% of revenue. Business development in South Korea was characterized by delays in follow-up orders and a general fall in demand. In addition, the nuclear phase-out announced by the South Korean government weighed on the order situation. A lack of follow-up engagements also led to a significant decrease in revenues in South Africa. By contrast, positive development was seen in Germany and Italy.
The Real Estate & Infrastructure Division generated 38.8% of segment revenue. Transport technology together with rail transport and infrastructure accounted for the business development. The sale of the South African TUV SUD South Africa and the weak order situation in the Middle East were more than offset by a further increase in revenue in the core market of Germany.
At € 78.1 million, EBIT in the INDUSTRY Segment was just below the prior-year figure (€ 77.8 million, up 0.3%) and thus also fell short of our forecast. EBIT development was impacted in particular by other expenses, which saw higher percentage growth than revenue. In addition, EBIT was negatively impacted by the recognition of impairment losses at subsidiaries in the US and Brazil, South Africa and the UK, in order to reflect the unfavorable development of local business in these countries. At 8.1%, the EBIT margin was unchanged on the prior year and thus within our expected corridor.
Segment assets decreased by € 1.0 million to € 521.2 million (prior year: € 522.2 million) and were characterized by working capital, particularly evident in other assets. In fixed assets, capital expenditures nearly compensated depreciation and amortization. € 14.4 million was invested among others in the construction of a research and development center for underwater pipelines and the further expansion of a refrigeration technology laboratory. Impairment losses on intangible assets identified as a result of the purchase price allocation led, by contrast, to a decrease in fixed assets.
The 5,736 employees (on average) of the MOBILITY Segment generated revenue of € 772.4 million. This is equivalent to nearly 32% of consolidated revenue. Revenue growth of € 37.9 million or 5.2% is in line with our expectations.
Roadworthiness tests and exhaust gas analyses, our core business, saw an increase in revenue, especially in Germany, after the first fee increase in almost eight years. In Germany, the number of vehicle inspections carried out declined slightly, whereas a significant increase was seen in Spain and Turkey. Business with driver’s license tests and damage assessment reports grew significantly. Services relating to vehicle preparation also showed a positive revenue development. Our homologation services were increasingly in demand, especially in China and the Czech Republic. Business was also particularly successful in emissions testing in Germany.
The business model in the MOBILITY Segment is partially geared to franchising as a growth driver. As a result, the ratio of purchased service cost to revenue is 15.5% (prior year: 14.9%), which is above the group-wide ratio of purchased service cost to revenue of 12.6%. At € 64.8 million, EBIT exceeded our expectations, but development was impacted by higher personnel expenses attributable to collective wage increases as well as higher other expenses, mainly due to the renting of new space. At 8.4%, the EBIT margin was within the expected target corridor.
As of the reporting date, segment assets came to € 359.1 million (prior year: € 355.9 million). The increase is primarily attributable to fixed assets. A total of € 27.3 million was invested in fiscal year 2017, including in the ASPro IT application system. The new administration building in Hesse, Germany was equipped and the modernization of the technical service centers continued to be driven forward.
The CERTIFICATION Segment represents approximately 30% of consolidated revenue generated (€ 714.3 million). The average headcount here was 6,375 in fiscal year 2017. With an increase in revenue of € 49.4 million or 7.4%, the segment fell only just short of our expected growth rate.
The Product Service Division generated approximately two thirds of segment revenue and accounted for the largest share of the revenue increase in the segment, with revenue growth of 7.5%. Our consumer goods audits and certifications were increasingly in demand, especially in Germany, China, South Asia and the US. Revenue development in the industrial goods sector was on the back of good utilization of our battery test labs in North America. However, growth in the ASIA Region remained subdued. Services for medical products in Germany and also the US, were increasingly in demand, whereas in ASIA, revenue in this business remained at a high level. As largest notified body, TÜV SÜD participated in the nearly double-digit growth of the global medical market.
The newly-established Business Assurance Division showed positive revenue development (up 7.1%). More than half of the revenue generated is due to our portfolio of services relating to quality, environmental, energy and safety management systems. The academy business showed strongest growth in the division, especially in the core market of Germany. With ongoing international expansion, revenue growth was also realized in India, China and Singapore. Our services in cyber security contributed to growth, also for the first time outside Germany.
Purchased services increased at a faster rate than revenue, raising the ratio of purchased service cost to revenue to 17.1% (prior year: 14.3%). This is due in particular to the customary commissioning of outside service providers in the academy business. Personnel expenses did develop at a lower pace than revenue, with the major share of the increase being attributable to collective wage increases in Germany. EBIT in the CERTIFICATION Segment amounted to € 81.1 million, and was within the range we expected. The generated EBIT margin of 11.3% exceeded our expectations.
Segment assets increased to € 348.5 million. This is equivalent to an increase of € 19.4 million or 5.9% compared to the prior year. This development was driven by the good course of business and the associated increased billing. A total of € 19.8 million was invested in the segment. The investment focus was on the development of software for process control as well as on the expansion of the laboratory network in the US and Asia.
The corporate functions are pooled under OTHER, generating revenue of € 21.0 million in the fiscal year 2017.
EBIT in OTHER amounted to € –22.6 million in the fiscal year. The value in the prior year was € –5.2 million, influenced by the write-up recognized through profit or loss of the existing stake in TÜV SÜD ATISAE. Segment assets increased by € 2.3 million from € 269.1 million to € 271.4 million. The company mainly invested in software.
For an overview of the development of revenue in the segments, including OTHER, and in the regions, please refer to segment reporting in the notes to the consolidated financial statements.
An essential success factor for TÜV SÜD is its employees. The number of our employees increases accordingly with the company’s success. By 2020, more than 27,000 people are likely to be employed by TÜV SÜD. At the end of 2017, TÜV SÜD had approximately 24,000 employees, half of whom work outside Germany.
As a technical services provider, TÜV SÜD mainly recruits in the area of natural sciences, where men still significantly outnumber women, particularly in Germany. The share of female employees in Germany remained unchanged at nearly 29%, in other countries, the share continues to be higher than in Germany at 33%, and also above the prior-year figure (32%). The percentage of female employees in the Group totaled 31%.
Globally, the share of women in the top management level (excluding the Board of Management) is 7.3%, which is one percentage point above the prior-year level of 6.3%. The next level down has a percentage of female employees totaling 9.7% (prior year: 11.3%). As a result of the strategic focus on development programs, its share is expected to increase over the next few years. TÜV SÜD AG signed the Diversity Charter in July 2017 and thus joined Germany’s largest diversity corporate network.
Our employees are on average around 42 years of age, with a marked age gap between Germany and other countries. Employees in Germany tend to be six years older than their colleagues abroad. They stay with the company for an average of twelve years, which is longer than their colleagues abroad, who tend to leave TÜV SÜD after six years.
Staff turnover throughout the Group stands at 7.0%, above the prior-year figure of 6.4%. At 3.1% (prior year: 2.3%), the turnover rate in Germany is at a low level. By contrast, a slight increase from 9.8% in the prior year to 11.4% in the fiscal year was seen in other countries.
In order to continue to meet the demand for qualified employees in the future, we expanded our recruiting activities at national and international level in the year 2017. Against this background, the global applicant management system has also been implemented in other countries. This means that TÜV SÜD’s job offers are currently available in twelve other countries via a platform for applicants. The aim is to use this platform worldwide for all positions offered at TÜV SÜD.
CHANGES IN HEADCOUNT
The average number of employees (full-time equivalents; FTE) for the year 2017 was 22,117, which is 1.7% up on the prior year. In Germany, the average headcount (FTE) increased by 3.1%, while abroad it rose marginally by 0.5%.
As of December 31, 2017, 22,268 employees (FTE) were employed by TÜV SÜD (prior year: 22,034). In Germany, 347 new jobs were created in the existing companies. The headcount at our foreign subsidiaries decreased by a total of 113 employees. This change already takes into account both the increase in the number of employees through acquisitions (44 FTE) and the reduction in the number of employees as a result of disposals (18 FTE). In the prior year, employee development was influenced by the acquisition of the Spanish ATISAE Group.
CHANGES IN HEADCOUNT IN THE SEGMENTS AND REGIONS
The reduction in the headcount in the INDUSTRY Segment related to our commitments in South Korea and South Africa. Here, corrective measures were introduced to compensate for the slowdown in conventional energy business. In Brazil, the weak order situation in the infrastructure sector led to further reductions in headcount. In preparation for the sale of our petrochemicals business in the USA, we continued to reduce our headcount there. Despite a decline in the number of employees, the INDUSTRY Segment continues to have the largest number of employees.
The increase in headcount in the MOBILITY Segment was mainly in Germany.
The CERTIFICATION Segment systematically increased its headcount. The focus is on the Academy and Cyber Security units and the worldwide laboratory network.
The comparative figures for the prior year in the MOBILITY and CERTIFICATION Segments have been adjusted to reflect the realignment of our divisions, taking into account the 180 employees in the MOBILITY Segment and nearly 300 employees in the CERTIFICATION Segment. They were all previously allocated to OTHER.
More than half of the total TÜV SÜD workforce was employed outside Germany in the fiscal year 2017. We expanded our workforce in EUROPE in order to provide our customers with sufficient capacity at all times. The focus here was on Germany. The number of jobs in the AMERICAS and ASIA Regions was slightly lower than in the prior year. Additions were offset by capacity adjustments to take account of selective market requirements.
In line with the segment presentation, the comparative figures for the prior year have been adjusted for the sub-region Middle East & Africa, which has been allocated to the ASIA Region in the fiscal year.
NEW HR ORGANIZATION PROVIDES RELIEF FROM ROUTINE TASKS
To enhance the efficiency and quality of HR work, we have pooled administrative activities in shared service centers group-wide. In the meantime, the transition has been largely completed and the HR business partners now have more capacity to comprehensively advise the specialist and management staff they support in their personnel policy.
We make use of the opportunities offered by ever-increasing digitization: TÜV SÜD’s managers have access to important HR information from their area of responsibility and the employees directly assigned to them – fast, up-to-date and clearly set out.
UNIFORM STANDARDS FOR PERFORMANCE ASSESSMENT
We aim to assess the performance of our employees as objectively as possible and on the basis of uniform criteria. To accomplish this, we have developed an IT system that enables management and employees to assess achievement against goals online and at any time. The system has been used in Asia since 2010. In 2016 and 2017, we expanded the user circle to the USA and South Africa, so that now more than 7,300 employees are registered online.
DEVELOPMENT OF EXPERTS AND MANAGEMENT – FOR THE FUTURE
At present, many job profiles are changing as a result of digitization, as are the demands placed on individuals.
An extensive “Digital Readiness” program is designed to enable TÜV SÜD employees to learn new skills and thus shape not only digital transformation but also their own development. From top management to every single employee in our organization, we provide training and support to lay the foundations of successful future development.
This is particularly required for managers and experts at TÜV SÜD. We want to foster and continuously enhance their talent and knowledge. To this end, we launched the Fit4Digital@TÜV SÜD program in the year 2017 in cooperation with the University of St. Gallen, which aims to improve our understanding of the requirements of the digital economy in companies. Tailored to the needs of the divisions and embedded in the activities of our TÜV SÜD Digital Service Center of Excellence, the program focuses primarily on the skills of our managers to identify and leverage the potential of new digital business models.
The requirements of digitization also play an increasingly important role in our Global Expert Development Program (EDP). With the EDP, we want to reach experienced senior experts in order to further develop them in core competencies such as innovation management, product development, customer orientation or knowledge transfer. In this way, we aim to prepare these experts for new tasks and, at the same time, to increase employee retention and prevent the loss of knowledge due to fluctuation.
JUMP! – FOURTH ROUND OF THE PROGRAM FOR HIGH POTENTIALS COMPLETED
We have been preparing employees with potential for divisional and cross-regional management tasks for several years with the Jump! program. In fall 2017, the fourth year concluded the program, in which 17 participants from various TÜV SÜD locations around the world worked on specific tasks and projects. Using four further training modules, participants were able to develop their leadership skills in an international context. Regular feedback and insights into personality and team concepts supported the personal development of the participants, who were also accompanied by mentors from senior TÜV SÜD management. Since the start of the program in 2009, two thirds of the participants went on to successfully take over a new function in
VOCATIONAL TRAINING SECURES THE FUTURE
In the year 2017, 142 trainees prepared for their careers at TÜV SÜD in Germany (prior year: 137). Many of them combined theory and practice by participating in dual track courses which TÜV SÜD offers in collaboration with universities of cooperative education in the areas of mechanical engineering, electrical and automotive engineering. Graduates are usually taken on and trained as test engineers or officially recognized experts.
TÜV SÜD – AN ATTRACTIVE EMPLOYER
For many years now, TÜV SÜD has been one of the most attractive employers in Germany, particularly for engineers and technical specialists who appreciate our company as a potential employer. Internationally, we were also able to achieve a number of excellent rankings and awards in the year 2017. TÜV SÜD ATISAE is one of the top 100 employers in Spain – and is thus one of only four German companies in this top group, which is compiled annually by the Spanish business magazine “Actualidad Economica”.
TÜV SÜD is also a strong employer brand in Asia, where we were able to further consolidate our good competitive position in the fiscal year. In the context of the “Excellence Employer of China 2017” competition, TÜV SÜD in China was again acknowledged as one of the 100 companies with outstanding HR management.
INTERNATIONAL YOUTH EXCHANGE PROGRAMS ARE POPULAR
As part of our 150th anniversary, we launched the Horizons program in 2016 to initiate an international youth exchange for our employees’ children between the ages of 14 and 18. We want to encourage personal relationships among our employees and their families around the world, across country and company borders. The acceptance of the program has been high since its launch. A total of sixty families, thirty from Germany and just as many from the international community, took part in the exchange program in the summer of 2017. The Horizons program will be continued over the next few years.
The youth exchange program will be extended by the Explore program. Children of employees who are studying are given the opportunity to complete a paid internship of up to two months at one of the TÜV SÜD locations around the world.
CAREER AND FAMILY – COMPREHENSIVE OFFERS FOR EMPLOYEES
Reconciling the demands of career and family is a key element of our corporate social responsibility. A large number of programs and offerings are available to our employees, ranging from searches for child care facilities, webinars on selected topics through to support with care for family members. To continuously optimize our commitment, we have regularly participated in the “berufundfamilie” audit since 2009. The focus here is on kindergartens and intensifying the increasingly virulent topics of careers and caregiving. In the fiscal year, we began to intensify the communication of our various offers and to supplement them with cooperations with additional childcare facilities.
SYSTEMATIC HEALTHCARE MANAGEMENT
In line with the increasing internationalization of our company, we are also pursuing an international approach to establishing corporate healthcare management. A Global Health Policy was adopted in the fiscal year which will regulate, among other things, our global organization of health protection as well as minimum standards and key figures in the fields of first aid and emergency management, risk assessment and industrial hygiene. It supplements the group works agreement developed together with the group works council in 2014.
The health index, which is determined in the course of the global employee survey, serves as a benchmark for occupational health management. It is supplemented by locally collected figures and indices, including accident and sickness levels or the rates of participation in healthcare promotion actions.
For several years now, employees on business trips have been able to use a worldwide network of 24/7 assistance centers to get fast and competent help in emergencies. This service has now been rolled out to all employees worldwide and the commitment to health and safety has been underpinned by the signing of the Singapore Declaration of the International SOS Foundation.
Company-wide healthcare campaigns support our employees’ own initiatives to promote preventative healthcare. In the year 2017, the focus was on the topic of a healthy back. For the year 2018, the campaign will focus on the heart.
Tried and tested offers such as flu vaccinations and colorectal cancer screenings as well as healthcare activities at individual locations complement our commitment and are well received by our employees.
New mobility concept for Germany
A new mobility concept was negotiated for Germany during the fiscal year. As a result, TÜV SÜD employees can claim a company car if they exceed a defined annual mileage. For employees with a mileage below this threshold, the previously valid fixed-rate expense allowance per kilometer was fixed for the coming years.
Please note that actual events in the course of the coming fiscal years could differ from our expectations presented below.
The following statements on the outlook for the development of TÜV SÜD in the coming fiscal year are based on the planning for 2018. This was prepared by the Board of Management and approved by the Supervisory Board on December 5, 2017.
As part of our strategic planning, which comprises the years up to 2020, we regularly use scenario analyses to examine the effects of economic development of our segments. The resulting findings and targets are also taken into account in the 2018 outlook.
We expect that the upswing of the global economy will continue at around 3.9% in 2018. The Kiel-based Institut für Weltwirtschaft (ifw) expects growth of 3.6% for 2019.
The German economy will continue to grow in 2018. The upswing has so far been based on a solid domestic economic foundation. The ongoing positive situation on the labor market is driving the positive consumer sentiment among private households. Commercial investment in construction as well as in capacity expansion and equipment will continue to grow since global economic growth promises higher exports and stable financing conditions create a favorable basis. The effects of the coalition negotiations and political concessions on the German economy are not yet foreseeable. We anticipate reduced cyclical momentum for the fiscal year 2019.
The cyclical recovery in the euro zone will continue on a broad basis, even though Italy continues to suffer from high national debt. In the UK, uncertainties about future economic relations with the EU dampen the propensity to invest and weigh on the British pound. We therefore expect that economic growth in the UK will continue to lose momentum.
The US economy will continue to grow in 2018. The tax reform that has been passed could result in additional growth impetus there.
Economic growth in the large emerging markets is expected to remain moderately positive, albeit with lower growth rates than in prior years. In Brazil, economic recovery is supported by stable commodity prices. The Indian economy should benefit from government infrastructure measures and strong private consumption, after the introduction of the GST (Goods and Sales Tax) in the fiscal year 2017 slowed economic growth. In China, the pace of expansion is being steered in order to drive debt reduction and the transformation into a service society.
For 2018, TÜV SÜD expects organic growth of 3% to 4%. Consolidated revenues generated with the existing affiliated companies should therefore be between € 2,480 million and € 2,525 million. The non-German affiliated companies already contribute over 40% to consolidated revenue – according to the customer’s place of business – and will continue to increase their share in the next two years.
In the forecast year, we will define the key points of our strategy through to 2025. We will focus on our core competencies, in which we intend to grow organically, and on future-oriented trends, in particular digitization as well as industries with long-term growth prospects. We will focus mainly on those markets characterized by high economic growth and a reliable business environment.
We expect revenue growth in the mid-single-digit percentage range for the INDUSTRY Segment in 2018. We generate approximately 43% of consolidated revenue in this segment outside Germany. The foreign share could fall slightly next year due to market shifts. The Industry Service Division is expected to generate 60% of consolidated revenue whereas the Real Estate & Infrastructure Division with over € 400 million will generate about 40% of revenue.
The largest revenue contribution in the INDUSTRY Segment comes from our steam and pressure business. Here, we are continuing to expand our market share in the USA and Asia, based therein on our services for inspection and testing according to the ASME standard (American Society of Mechanical Engineers).
We expect the highest revenue growth rate in absolute terms from the international project business in the areas of technical construction supervision, power generation and quality management. We anticipate substantial growth in Europe in particular. In the forecast period, we intend to acquire further orders in this area through our expertise in the aviation sector.
There is an increased level of demand for services for the chemical and petrochemical sector. In this area, we want to focus more strongly on our core market of Europe. We intend to sell our remaining activities in the USA.
We expect a fall in demand for conventional energy. The German market continues to shrink. Services for decommissioning and testing projects could only compensate in part for the decrease in revenue resulting from the gradual decommissioning of conventional power plants. The nuclear phase-out announced in South Korea means we can also expect a decline in business activities in the local market.
We intend to further enhance our global leadership in independent technical risk calculation and analysis with international customers.
With our consulting, testing and certification services for buildings, lifts, infrastructure and rail transport we intend to continue our growth trajectory in 2018.
We lead the market in safety-related services for lifts in Germany and intend to consolidate our market penetration in this area. We also have a strong market position in other European countries and the Middle East. In addition, we see international growth potential in the mid-term in other regions, which will be successively tapped in the forecast year.
Our core markets for our services provision for buildings (testing, certification, consulting and engineering services, simulation and energy efficiency) are Germany and the UK. As innovation leader, we work with our customers to shape the transformation towards digital building information modeling (BIM). In Germany, we expect growth in the Testing and Certification Segments (construction controlling and assessment, fire protection, building materials, electrical engineering and building technology) as well as simulations and services to improve energy efficiency. Market conditions for consulting and engineering services are also positive.
The Rail business continues its global growth course with a strong market position. The sector is characterized by internationalization and simultaneous consolidation of the manufacturers (OEMs). Our comprehensive service portfolio continues to set us apart from our competitors. With the commissioning of the high speed rail link Munich — Berlin we have achieved an excellent starting point for the expansion of the European Train Control System (ETCS). In the long term, it is planned that ETCS should replace the different train control systems currently in use throughout Europe. We will focus on the acquisition of international large-scale projects in future.
We anticipate low-single-digit revenue growth for the MOBILITY Segment in the forecast period. Foreign business will generate more than 10% of revenue in 2018.
Our core business is our offering of roadworthiness tests and exhaust gas analyses, damage and valuation reports, and driver’s license tests. We offer these services to private and business customers in Germany, Turkey and Spain. We expect sustained growth driven by targeted – as well as digital – sales measures.
Homologation services and emissions testing expect strongest percentage growth. Significant drivers are emissions testing on a domestic level and homologation services from an international perspective. Through the targeted acquisition of key accounts and the expansion of collaborations for claims management, we intend to further increase revenue with our service portfolio for manufacturers, retailers and workshops. As a result of comprehensive sales measures we anticipate an increase in the number of vehicles managed in the fleet business.
The driving ability and medical-psychological examinations business, newly integrated in the fiscal year 2017, will contribute moderately to revenue growth.
We are continuing our innovation activities in the MOBILITY Segment with a view to tapping the potential of digitization in the automotive sector.
Revenue growth in the CERTIFICATION Segment should be in the high single-digit range in the forecast year 2018.
Growth drivers in the international markets in this segment include our services for consumer and industrial goods as well as food, cosmetics and healthcare products.
The focus on selected key accounts, the expansion of the retail business of a major German customer in the USA, and our international orientation will result in consumer goods growth in the mid-single-digit range. In this area, we also respond precisely to the wishes of our customers and offer differentiated, innovative and value-adding services along the supply chains.
Our offering in the field of industrial goods benefits in particular from technological innovations such as smart testing and the growing importance of wireless components in almost all products. We are systematically expanding our development support services for manufacturers and suppliers and are offering new solutions for additive manufacturing and the application of digital data modelling. We will also offer our customers extensive value-creating services for electromobility and stationary energy systems.
We intend to further defend and enhance our global leadership position in the area of healthcare and medical products. We will focus in particular on the US market. We expect further growth impetus for high-risk products under the European Medical Products Regulation (MDR) and the EU In Vitro Diagnostic Device Regulation (IVDR). The regulations lead to an expansion of the monitoring activities and a more extensive product range. In future, numerous cosmetic products will be covered by MDR. At the same time, this results in a market adjustment after several Notified Bodies discontinued their services. In addition, we will appeal to a broader customer range with our premium services and our services for cardiovascular, in-vitro and reusable medical equipment. In addition to uncertainties, the consequences of Brexit offer opportunities for competition.
Through our network of state-of-the-art test laboratories, we guarantee our customers with international operations local access to the TÜV SÜD service portfolio worldwide. Standardized laboratory management systems and regionally harmonized laboratory structures will increase the efficiency of the laboratories and achieve a higher utilization of our network. We are continuing to expand our risk-based chemical tests.
We combined our services for cyber security, certification and training in the Business Assurance Division in the fiscal year. By pooling our competencies we can offer our customers a complete range of services from a single source. The full service portfolio is offered in Germany, and also in the USA, Italy, India and Singapore. We will continue to expand our product portfolio in cyber security in particular.
We expect the highest revenue growth as a percentage in the CERTIFICATION Segment with the seminar business, particularly in Germany. Additional growth impulses should result from construction of eLearning platforms and the expansion of the academy offerings in the international environment.
Certification services with core products, such as ISO 9001, supplemented by certification in the areas of food safety, sustainability and corporate social responsibility will continue to generate the greatest proportion of revenue. We intend to secure our market leadership position in Germany with further growth. At the same time, we will leverage our global presence to offer our international customers one-stop certification for global and integrated management systems. In the forecast period, Asia remains the most significant growth region for certification services.
CONTINUOUS EARNINGS DEVELOPMENT EXPECTED
In the development of our business activities, we focus on markets and innovative industries where sustainable profitable growth with target returns between eight and twelve percent can be expected. The development of our earnings depends crucially on our ability to exactly meet our customers’ needs and expectations with our services and innovations. We can offer our customers made-to-measure services from a single source, which are both efficient and flexible. With our well-trained and motivated employees, we have an international presence at the customer’s location.
Based on current foreign exchange forecasts, we expect a further strengthening of the euro. This can impact on our business development.
We are continually analyzing our business processes, implementing measures to improve efficiency and optimizing our cost and process structures accordingly. We focus on increasing earnings and profits in a sustainable way. For the forecast year 2018, we anticipate a high single-digit increase in EBT.
We are forecasting EBIT growth in the upper-single-digit percentage range in the year 2018. The EBIT margin should also remain in the high-single-digit percentage range.
Our success is founded on the high quality standards we impose upon ourselves coupled with the state of the art services we offer and the collaborative, trust-based way we work with our customers as process partners. The forward-looking orientation of TÜV SÜD is another factor that will have a positive impact on earnings development in the forecast year 2018. Specifically this includes new innovative services for digitization and new technologies, close cooperation with international key accounts in addition to our expertise in our traditional markets. We therefore expect EBIT to develop positively in all segments in the year 2018.
In the INDUSTRY Segment, we anticipate an EBIT increase just in the double-digit range. Earnings development in the MOBILITY Segment should be in the mid-single-digit range. We again forecast an increase in EBIT just in the double-digit range for the CERTIFICATION Segment in the forecast year. The EBIT margin should be in the high single-digit-range for each of the three segments.
We anticipate a one-off effect on earnings before taxes in the forecast period from the sale of PetroChem.
Various factors, which are largely independent of each other, influence the development of TÜV SÜD’s earnings. The economic development of our markets together with the regulatory political decisions there will set the underlying trend. Our global presence close to our customers and our expertise in innovative technical services are of far greater economic significance. The Corporate Innovation Fund finances forward-looking projects. A total amount of up to double-digit million euros will be made available for this purpose. The allocation of this funding cannot be planned and is therefore not included in these statements on the outlook. Consequently, EBIT could be below the expected figure of € 215 million if the innovation budget were to be used in full in the coming year.
We will streamline our corporate structure systematically in order to achieve a higher level of efficiency and cost savings, and increase our strength through transparent structures.
Enhancing our internal processes is a key element in achieving our Group’s goals. The focus is on the phased introduction of shared service organizations in individual countries and regions as well as implementation of harmonized software-based commercial processes. In this way, we are creating the requirements for efficiency increases in the commercial and administrative area.
Economic Value Added (EVA) is a key indicator for measuring TÜV SÜD’s success. On the basis of the positive EBIT development described above and disproportionately low increase in average capital employed in line with revenue, we expect EVA of around € 80 million to € 86 million for the forecast year 2018.
In the coming fiscal years, we intend to further increase our headcount by around four percent. We will do this through the targeted recruitment of well-trained and dedicated women and men. After all, it is thanks to our highly skilled and motivated employees that we are able to implement our growth strategy and continue the positive business development of TÜV SÜD in the future.
More than half of our total workforce is employed outside Germany and as international expansion continues, this percentage will increase continuously in the coming years.
We do not expect to see any significant change in the other non-financial indicators compared to the prior year.