Kendrion N.V. (KENDR) Earnings Call Transcript & Summary

Ladies and gentlemen, good afternoon. I hereby open the General Meeting of Shareholders of Kendrion, which is held fully virtual, as you see, from the head office in Amsterdam. Taking into account the circumstances surrounding the COVID-19 pandemic, shareholders have been invited to follow the annual meeting virtually using Zoom. In-person attendance by shareholders is, therefore, not allowed. On behalf of the Supervisory Board and the Executive Board, I would welcome you all. My name is Henk Ten Hove, I'm Chairman of the Supervisory Board and member of the HR Committee. Next to me is Marion Mestrom, she is a colleague and also the Chairman of the HR Committee. And on my other side, we have here our CEO, Joep van Beurden; and our CFO, Jeroen Hemmen. And later on, Frits van Hout, who is our proposed new Supervisory Board member, will also be present. My other 2 colleagues, Jabine van der Meijs and Erwin Doll, are participating through Zoom. In view of the internal audit procedures carried out by Deloitte, Mr. Beemer of Deloitte Accountants will also participate, but also virtually. As you've noticed out of my introduction, the meeting will be held in English. But before we proceed with the agenda, I would like to address a few formalities. The notice convening the General Meeting of Shareholders was given in accordance with Article 45 of the articles of association. It means that valid resolutions can be adopted. The notice convening the General Meeting of Shareholders was published on our website on Monday, the first of March this year. As of this date, the agenda and the explanatory notes to the agenda were available for inspection and could be attained free of charge at Kendrion's head office in Amsterdam or via the corporate website. The 2020 annual integrated report was published on our website on the 19th of February this year. The record date for this meeting was Monday, the 15th of March 2021. Voting rights cannot be exercised during this virtual meeting. Therefore, shareholders were instructed to exercise their voting rights prior to the meeting by granting a proxy to the company secretary or via the e-voting tool on the website of ABN AMRO. This voting procedure was described in detail on the convocation notice and the explanatory notes to the agenda. So I hope you all have been able to handle that. Mrs. Hélène Verhoeven is designated to prepare the minutes of this meeting. As you may appreciate, audio recordings of this meeting are made for reporting purposes. And then some figures. We have a representation of 10,359,057 shares at this meeting, and they represent 69.37% of the issued capital and 70.12% of the voting capital. This difference is caused by the shares held by Kendrion on its own capital. No voting rights are attached to these treasury shares, and there is no dividend entitlement as well. 10,359,057 votes have been cast prior to the meeting via the e-voting tool on the website of ABN AMRO and the granting of proxies to the company secretary. Then a few things about the questions. We have invited shareholders to submit questions about items on the agenda prior to this meeting. And the deadline for the submission of questions expired on Friday, the 9th of April this year at 1400 hours. Prior to the meeting, we received questions from the VEB. And those questions have been answered prior to this meeting, and they also have been published on our website. And I hope you had time to go through them. But nevertheless, there is a possibility to ask questions during this meeting. It will require that you virtually raise your hand by clicking on the Raise Hand button at the bottom of your screen. Our moderator will receive a notification and unmute your microphone when it is your turn to ask your question. When asking questions, please start with mentioning your name and, if applicable, the organization you represent. If necessary, conditions may be set on asking questions to ensure an orderly meeting and discussion. During this meeting, you are in a listen and view mode only, very quiet. The chat function is disabled, and the Q&A button can only be used to ask the moderator technical questions. I refer to the slide that is put on the screen right now, and that shows the different functions on the system. And I hope that is clear enough to you. Okay. After these introductory comments, we move on to Item 2A on the agenda, and that is the report of the Executive Board on the financial -- the turbulent financial year 2020. This item is a nonvoting item and has been submitted to the General Meeting of Shareholders for discussion. So then I'll now give the floor to Joep first for the presentation. Joep?

Thank you, Henk. Good afternoon, everybody. And as announced just by the Chairman, Jeroen and I will report on our activities during the year 2020. The agenda for this, first, I will give a short overview of the Kendrion Group, after which I will update you with regard to the actual COVID situation at Kendrion. Jeroen will review the 2020 financial results, and I will be back to give you an update of the progress we have made, both strategically and operationally, in the course of 2020. And after that, there will be the opportunity to ask questions in the system, as just been explained by the Chairman. Before the COVID update, I would like to draw your attention to the following. Certain statements contained in this presentation constitute forward-looking statements, and these forward-looking statements rely on several assumptions concerning future events and are subject to uncertainties and other factors, many of which are outside the company's control that could cause actual results to differ materially from such statements. First, the overview of the group. Here, you see representation of Kendrion around the world. And as you can see, we have a global presence, with manufacturing and sales locations in Asia, in Europe and in the United States. We have over 2,400 employees. And in 2020, our revenue was just shy of EUR 400 million. I would like to draw your attention to the bottom left, where you see the split between the Automotive and the Industrial parts of the company, which is now roughly resembling 50-50 post the INTORQ acquisition. And for those of you who have seen this presentation before, it used to be more 2/3 Automotive, 1/3 Industrial. So a more balanced group post the INTORQ acquisition. Our businesses. First, Automotive. I talked -- just talked about it, 50% of our business, where we focus on actuators, specifically for the new mobility, as it is electrified, hybrid or autonomous driving. Industrial Brakes, strengthened by INTORQ, where we have a full line provision of both electromagnetic brakes, both permanent magnet brakes, but also spring-applied brakes. And Industrial Actuators and Controls, where we have actuators for a great variety of different applications, including industrial automation, locking units, fluid control systems and many more. I will get into a bit more detail further on in the presentation. And then, finally, as to wrap up this introduction, our organization structure. We have a simple and flat organization. And we believe this structure amplifies our culture, our global and unified approach to our growth opportunities and the right balance between central and local decision-making. It has clear accountability for our business groups, with a manager for brakes, one for our cash engine of actuators and controls and then the functional group of the FD, the COO and CCO tasked with delivering on the global organic growth opportunity of Automotive. Of course, China is represented as well. And in short, we feel this organization structure will help us deliver our strategy. Next, our COVID update. Our priority in dealing with the pandemic is the health and safety of our employees, their families, customers, suppliers and all other stakeholders, and to safeguard the group's continuity to ensure that we come out of this pandemic stronger than before. All COVID prevention measures continue to be enforced. Our employees are working from home as much as is possible. In all our production facilities, we have strict separation between shifts, professional cleaning and disinfecting of relevant surfaces as the shifts change. Our canteens are still closed, and we measure employees' temperature regularly. The use of face masks is mandatory. But of course, we have been affected by the pandemic, as we all have. The most recent update as of this morning earlier indicates we currently have 17 active cases within the group, of which, fortunately, no one is hospitalized. Sadly, last fall, we have lost one of our colleagues to the virus. Throughout the pandemic, we've been able to continue production in all our factories in a safe and responsible way, and we continue to deliver to our customers around the world. Next, I want to take a look at our illness rates. Health is always at the forefront at Kendrion, and with COVID-19 affecting the world even more than normal. This slide, however, is not about COVID. It indicates the overall illness rate at Kendrion, both in 2019 and in 2020, on a 12 month rolling basis. And as you can see, despite the pandemic, our overall illness rate has gone down. And although we have not investigated the root cause, our hypothesis is that all the hygiene measures we have enforced protect not only from COVID, but also from other illnesses like the common cold and the flu. Let's now go to the business review. Jeroen?

Yes. Thanks, Joep. Good afternoon, everybody. I will present the most important financial results over 2020. As we all know, 2020 has been an exceptionally challenging year for businesses around the globe, Kendrion being no exception to this. Pressure on our revenue was most pronounced in Q2 when organic revenue decreased 34%, with many of our automotive customers closing operations for the larger part of April and May. As from June, revenue started to gradually recover, and this recovery continues in the remainder of 2020. The EUR 103.1 million revenue in Q4, which is traditionally our weakest quarter, was 5% higher than in Q3 and even 21% higher than in Q2. On an organic basis, consolidated revenue in Q2 was still 2% lower than in the previous year, but both Industrial units posted organic growth and also the passenger car segments in Automotive showed a high activity level towards the end of the year. On the back of the higher revenue, the continued use of cost flexibility as well as a strong contribution from INTORQ, EBITDA in Q4 ended 58% above the previous year. The strong ending of the year meant that we were able to post a slightly higher EBITDA compared to 2019, and the EBITDA margin increased from 10.6% to 11.3% despite an organic revenue decline of 17% for the year. EUR 19.6 million lower organic operating cost and a 1.1% added-value margin increase contributed to the improved EBITDA margin. Profitability in the Industrial units developed positively, with the EBITDA margin increasing from 12.2% last year to 15.3% in 2020 despite an 11% organic revenue decline -- decrease. INTORQ, but also the original Kendrion business units, both contributed to the profitability. Automotive faced most headwind from the pandemic, with revenue decreasing 20% into '20. And in China, we -- yes, I think I was just saying that China realized a 5% organic growth for the year, with a good underlying growth in all 3 business units, offsetting the impact of the pandemic. In 2020, we also incurred EUR 4.4 million one-off operating costs that have been normalized for the results compared to EUR 5.7 million last year. These one-off costs included transaction costs related to the acquisition of INTORQ, restructuring expenses and an impairment of previously capitalized development costs. Then moving to cash flow and the development of our financial position. Okay. Yes. So our normalized free cash flow before acquisitions was EUR 31.5 million, which is a record for Kendrion. A EUR 7.3 million organic reduction in normalized working capital and the suspension of nonessential investments contributed to the good cash conversion. Although nonessential investments were suspended, we continue to invest in our growth opportunities. R&D expenses increased in both absolute terms as well as in the percentage of revenue. Total working capital as a percentage of revenue remained flat at 10.4% despite the higher share of industrial activities, which is typically more working capital intensive. The leverage ratio, defined as a total net debt divided by 12 months EBITDA, was 2.3%, substantially below our covenant level of 4.7% and also below the long-term covenant level of 3.25%, which will be applicable as from the end of 2021. The strong cash flow and financial -- based on the strong cash flow and financial position and as a sign of confidence in our business fundamentals, Kendrion proposes a dividend at the high end of our policy. The total dividend amounts to EUR 5.9 million, which is half our normalized net profit before amortization of intangibles arising on acquisitions. This translates to EUR 0.40 per share. As usual, the proposed dividend is payable in cash or in shares at the option of the shareholder. This concludes the financial review. And with that, I hand back to Joep.

Thank you, Jeroen. I will now proceed with an update of strategic and operational progress we made in 2020. Jeroen just summarized the year, and I think that we have steered the Kendrion ship safely through this storm so far. I'm proud of the Kendrion team, but what I'm possibly even more excited about is the progress we have made on our strategic agenda. Despite all the supply chain issues, the cost savings, the squeeze on investment, customer shutdowns, our inability to travel and on and on, we have made good progress with our long-term agenda. We integrated INTORQ. We created the business unit Industrial Actuators and Controls. In Automotive, we added EUR 350 million in lifetime revenue to our long-term order book, which is a book-to-bill ratio of 1.7%. And we have decided to build a 28,000 square meter manufacturing facility in Suzhou to accommodate our future growth there. We also made significant progress upgrading our IT infrastructure and worked hard to further implement our culture of global seamless cooperation that we call The Kendrion Way. Now let's get into a little bit more detail. You've seen this picture before. We call this Kendrion Strategic House. The top of the building indicates our strategic intent. We aspire to continuously grow the revenue and profitability in a sustainable way, with a lean and focused organization, and to provide a top-quality work environment to our employees. Linked to this are our medium-term objectives such as our target to grow with at least 5% organically, on average, between 2019 and 2025. We underpin this strategic goal with 3 pillars. The first is Automotive, representing around half of group revenue. In Auto, we focus on growth and especially on the opportunity we see developing in actuators for Autonomous, Connected, Electrified, Shared mobility, the so-called ACES. The second pillar is Industrial Brakes, which is around 1/4 of group revenue. And here, we offer a full range of brakes and see ample growth opportunities in robots, both industrial and collaborative, in wind power, in elevators and in more. Here, too, we focus on growth. The third pillar is Industrial Actuators and Controls, the merged combination of ICS and IMS. Here, the focus is on profitability and cash generation. Internally, we refer to this new BU as our cash engine, and we want this engine to keep generating cash and profits, focused on selected industrial segments such as energy distribution, fluid control, machinery and logistics and transportation applications. And then, of course, we have our focus on China, active in all 3 domains with the same intent: growth in auto, brakes; profit in IAC. With aim to be fully integrated and after several years of strong growth in China, the profile of Kendrion has changed. In the metaphor of the strategic house, this looks like a stronger and more balanced structure, not dependent on any one vertical, and geographically diverse. Let me now expand a little on the strategic house, starting with our culture. Of all the changes we have made over the past 4 years, the most important, in my view, is the change in the way we get things done at Kendrion, our culture. And to paraphrase that change, we have gone from a collection of operating companies, each optimizing its own performance, to a truly global team of specialists that cooperate to optimize the performance of the Kendrion Group, and we call this The Kendrion Way. It's not just a slogan on a few posters in our offices. We spend a significant time in all our locations, led by a broad team of our employees, to ensure The Kendrion Way drives our behavior. And I would like to highlight another important part of our foundation. Corporate social responsibility is an integral part of the way we do business at Kendrion. We strive to make substantial improvements in all 3 pillars that comprise our CSR framework: natural capital, social and human capital and responsible business conduct. When it comes to the relative reduction of CO2 emissions and energy consumption, we target a 15% reduction compared to 2018. In 2020, we made progress on both fronts, reducing relative CO2 3.2% and relative energy with 1.3%, despite the pressure on revenue and added value. We also work hard on expanding our responsible product portfolio, aspiring to work on products to improve safety, health or that help limit climate impact. We have work to do, but made a good step forward towards our 2023 sustainability targets. Let me now share some of the highlights of the past year, starting with Auto. As we all know, the automotive market has been negatively affected by the pandemic. Year-over-year, vehicle production was 16% lower than in 2019 at 74.5 million vehicles. And this is relative to 2019, in itself, around 6% lower than 2018. On the other hand, the disruption in especially passenger cars triggers enormous investments in new technology at all large OEMs and Tier 1s. And from our viewpoint, that has not changed in 2020. The opportunity for growth related to new actuators designed to help drive the innovation in the automotive sector around the ACES is intact, even accelerating. At this slide, we take a look at the number of battery electric vehicles and plug-in hybrids. As is clear, the growth of both classes of electrified vehicles has been and is projected to remain strong. In fact, these numbers represent an annual growth of over 40%. As a proportion of total vehicle production, the share of electrification is expected to raise from less than 3% in 2019 to over 11% in 2023. It's therefore not surprising that all major OEMs and Tier 1s are investing heavily in this. And we, too, have been investing relentlessly in our product road map and our commercial organization to make full use of this important trend. And it's yielding results. This slide represents the lifetime revenue and Automotive nominations won in 2018, 2019 and 2020. We calculate this by assuming that projects for passenger cars have a lifetime of maximum 7 years after start of production. And for commercial vehicles, we take a maximum of 10 years. We use the volumes and pricing agreed with our customers, but do add our own judgment to that. In 2020, we won a gratifying EUR 350 million worth of new business or a book-to-bill ratio of around 1.7. Of the 2020 nominations, 60% is independent of and 40% directly related to the combustion engine. A major nomination driver was successful projects at key OEMs such as the Volkswagen Group, Ford, Daimler Truck, Continental and ZF WABCO. More than 20% of the business wins will end up in pure electrical vehicle platforms of Volvo, Porsche and Ford, among others. In 2020, we did notice a significant change in the R&D activity level for combustion engine-related products at our customers, and this had 2 effects. On the one hand, some projects we won got canceled, most notably a project we won in China for a so-called auto particle filter as the Chinese government relaxed some of the strict emission rules for combustion engines in response to COVID. On the other hand, many combustion engine-related products that were scheduled to wind down are running for longer, in some cases, a number of years. The balance of the 2 is not an exact science, but our current best estimate is that the net effect of this is a reduction in our total pipeline with around EUR 100 million in lifetime revenue or combustion engine. Correcting for this means that, over the past 3 years, we have won around EUR 910 million in new projects. Of this, around 60% or EUR 530 million is independent and 40% or EUR 380 million is related to the combustion engine. All in all, we are pleased with our pipeline, which we expect to drive organic growth over the coming years. For 2021, we continue our focus on expanding our pipeline, especially in dedicated electronics and innovative valves and actuators for the ACES. Talking of which, I would like to give one example of our Lighthouse Projects that we are experiencing particular strong traction with. Autonomous driving, connected vehicles, electrification of the powertrain and shared mobility are mutually reinforcing developments in the automotive industry. Combined, they are disrupting the automotive value chain and are a significant driver of growth. Through our Lighthouse platforms, we aspire to develop forward-looking products, making use of this opportunity. And here, you see one example, our new AVAS Sound PHANTONE product line. AVAS stands for Acoustic Vehicle Alerting System, which is legally required in electrified vehicles. Our product offers both active sounds in electrified cars for outside compliant with AVAS regulation and a comfortable, recognizable sound inside the cabin. PHANTONE is a full plug-and-play solution compatible with the OEM's electrical architecture. And we have a design tool to help the OEM create its own branded acoustic design. We've also brought up an ecosystem of partners to integrate loud speakers and additional software, if needed. In 2020, several global OEMs selected PHANTONE, and the first production is scheduled for 2021, later in this year. In summary, 2020 was a tough year for Automotive, but with an important silver lining. Our pipeline expanded, and we are confident that we will make use of all the disruption in the market over the coming years. Next, let's take a look at Industrial Brakes. In 2020, brakes were doing well and benefited especially from growth in the wind power segments in China, driven by government subsidies for clean energy. This resulted in a strong performance. We Officially opened our new production plant in Pune, India, and we strengthened global sales alignment, which is underpinned and supported by the manufacturing location closest to the customer. We have a global commercial pipeline based on our full line of electromagnetic brakes and clutches, and we further expanded our product offering with the launch of new spring-applied brake family. And in 2020, it was not just wind power that grew, we also had a considerable expansion in intralogistics. We will continue with our clear focus on specific global growth markets, intralogistics, collaborative and industrial robots, industrial trucks and wind power using our global presence, Europe, the U.S. China and India. All in all, a strong year for IB and ample opportunity for further growth in the coming years. Next, IAC. Just as in IB, we have integrated the former BUs ICS and IMS quickly and successfully, achieving synergy savings of EUR 1.6 million in the process. The combination has improved its market position in distinct verticals like energy distribution, fluid controls, machinery and logistic and transportation applications. Anticipating further growth in these verticals, we've expanded our production facility in Romania by 3,000 square meter. And like IB, IAC has had a good year. The impact of COVID on IAC was mixed: in some segments, like textile machinery and aviation, revenue declined; in others, like medical applications and infrastructure, the market was better. On balance, this has resulted in a good financial performance. IAC is active in around 30 different product market combinations. And one of the tasks for IAC's management is to invest in those segments that offer potential for growth, while ensuring the other segments are optimized for profitability and cash flow. And on this slide, you see some examples of areas where we think we can expand, for example, industrial locks for devices like PCS testers, freezers, centrifuge, et cetera. And we see opportunities in several medical products, like actuators for dialysis and anesthesia equipment. On the control side, we have launched a new drive controller for Automated Guided Vehicles. And we provided samples for inductive heating for applications like paper coating and industrial ovens. In the U.S., we see growth potential in fluid control devices for both beverage dispensers and medical devices. So a good year for IAC. And before I hand to Jeroen to review our financial goals, let's have a look at China. In China, we continue to grow during 2020. With the contribution of INTORQ Shanghai, revenue increased more than 70% and organically. So without INTORQ, we grew by 5%. Here, too, we quickly integrated Kendrion China and INTORQ Shanghai, and we have had one China IB management team covering both Suzhou and Shanghai from Q1 2020. Lifetime 2020 nominations across all business groups in China were significantly higher than a China-based revenue. And this has further strengthened an already strong China-based project and revenue pipeline. To accommodate that pipeline, we have decided to build our own 28,000 square meter production facility in Suzhou. Here, you get an impression of our planned facility located in Suzhou's Industrial Park or SIP. SIP is recognized as the most high-tech area in Suzhou and is the premier location for technology and advanced manufacturing companies there. In Phase I, we plan to build close to 28,000 square meter, with the possibility to later add another 12,000 square meter in Phase II. For this project, we are receiving strong support from the Suzhou local government, who have granted us favorable conditions for 30 years of land use right. And as you can see, we are planning photovoltaic panels on the roof and expect to generate 1.1 megawatt hour, which should cover up to 60% of our internal energy requirements. Which brings us to the final part of this overview, our financial targets. Jeroen?

Yes. So at this point, we would like, again, to highlight our ambitious midterm financial targets, which we have disclosed for the first time during the Capital Markets Day in September 2020. First and foremost, we target to realize at least 5% average organic growth between the financial years 2019 and 2025. And for your reference, the pro forma revenue in the pre-pandemic year of 2019, including INTORQ, would have been EUR 467 million. This targeted growth is driven, first of all, by an increased content per car and increased application uptake in Automotive; secondly, market and application growth in robotics, logistics and wind power in Industrial Brakes; and finally, in market growth and an increased share in China and selective niche markets in Industrial Actuators and Controls. Our updated profitability targets include realizing at least 15% EBITDA margin and 25% return on invested capital in 2025. In order not to mix up returns on M&A and operating assets, we have excluded intangibles arising from acquisitions from the invested capital. Operational leverage from the targeted revenue growth, while maintaining a lean organization, is the most important driver behind the realization of both profitability targets. Finally, we have maintained our target to distribute between 35% and 50% of normalized net profit as dividend to our shareholders. This concludes the presentation part of the report by the Executive Board. And with that, I hand back to the Chairman.

Thank you very much. Before we go into the Q&A, it's good to mention that the presentation you've seen is available or will be made available on the corporate website. But now you have the chance for your questions. Go ahead. And again, it requires that you click on the Raise Hand button at the bottom of your screen.

We will now take the first question from Jasper Jansen. Please go ahead.

Hello, everybody. This is Jasper Jansen. Can you hear me?

Yes.

Yes, loud and clear.

That's wonderful. Great. Thanks so much for the presentation and also for the answer on our letter, of course. I have a few add-ons with respect to the targets for 2025. I believe you already said that sales growth is a key driver also of the ROIC and the EBITDA margin targets for 2025. So I just wondered if you could maybe give a little bit on the thought process on that. For instance, what will happen if you will realize sales growth levels of 3% or 4%, do you still think it's realistic to get those EBITDA in ROIC levels? So that's my first question. And my second question is about the ROIC target. To my understanding, you exclude M&A in this target, which I can understand and also appreciate But I do wonder how do you make sure that potential M&A will be value accretive? So maybe you can give some more color on that. So how much ROIC do you want to make on an acquisition? And how much time do you give yourself before you get there? And then, finally, just for confirmation. Is it right that you will exclude potential M&A in the ROIC target, not only in the asset base, but also the profits for determining the ROIC level in 2025? So those are my 3 questions on the targets.

Okay.

Okay. Yes. Thank you very much. Joep, you start.

Well, yes, briefly because most of these questions, I think, are for Jeroen. But on the first one, Jasper, you're basically asking for the operational leverage. So clearly, it's really important for our other financial targets to reach that 5% growth. By the way, as you noticed, but I'd like to emphasize, that we have taken 2019, including pro forma, into our adjusted base. So it's quite a target. At the same time, If you've looked at the businesses that we have, roughly 80% of our revenue today is exposed to what we think are substantial and long-term growth trends that we hope to make full use of. But yes, operational leverage is certainly important to reach the other targets as well. Now you asked specifically, what if you missed 3%, 4%? Maybe, Jeroen, you can give a bit of color what that would mean. And then the other 2 questions around the ROIC and the inclusion of M&A, Jeroen, perhaps, for you as well.

Yes. No. Yes, to be honest, I think, on the first question, what if it's 3%? That is something that we need to track in the coming years. We target 5%. We expect that we can realize 5%. If it's less than 5%, it will be more difficult. Maybe we have then to take additional actions, but that also, at that moment, really depends on the outlook at that point. Then on M&A. So you're right, we exclude intangibles arising on acquisitions from the invested capital base. If you don't do that, then basically, yes, you don't allow yourself to do any acquisitions. Because by definition, if you buy something close to a market price for a target, then you can not -- will not be able to realize 20% or 25% return on that. So if we identify a target -- an M&A target, obviously, on that target, we do our analysis, whether it's accretive. We do valuation exercises based on multiples, based on free cash flow -- yes, discounted free cash flow. We take into account potential synergies on the cost sides, on the commercial sides, and that goes into the mix. You compare that to your weighted average cost of capital. And when we believe that, yes, in the short to mid-term, we will be able to generate a return on invested capital in excess of that weighted average cost of capital, then we think that acquisition will add value to the shareholders. So that's basically the way we do it. And on the third question, I only wrote down profit.

If the profit is included...

Yes, Jeroen.

Yes, the profit is included in the metric. So the answer there is clearly yes.

Yes. Okay. Thank you. Clear enough, Jasper?

Yes. Just to make sure, so you will exclude it from a capital base, but you will include profits from M&A? Because that sounds like an inconsistency to me. So what's the thought process behind that?

Not really because, in the end, Kendrion exists of many M&A activities in the past. So our profitability includes also the profit of, for example, the Linnig Group, which is now part of Automotive, or Shelby or Kuhnke, while in our intangibles arising on acquisitions, yes, the goodwill is basically still there. So I don't think that, that is an inconsistency. Because if I would take out that profitability as well, yes, then we're really not left with much profits and then the calculation, I think, does not make any sense.

Okay. I'm sorry, I think I must have asked the question wrong. Then my question is, will incremental profits from new M&A between now and 2025, will that be excluded? That's my -- actually, that's what I meant, not of course, of historic M&A.

Okay. But that is the same answer. So the metric is really -- and this is also in line with internal hurdle rates. So the metric, for example, if you take INTORQ, then we do take into account the operating assets of INTORQ, which was around about EUR 30 million. And we also do take into account the profitability of INTORQ. What -- yes. So the answer still is yes.

And maybe for me to add to what has been said, there is also still a Supervisory Board who is affording a manipulation in whatever direction, assuming that management would intend to do that. And we have a track record where our targets always have been quite ambitious. So I'm not so concerned that we get to sort of a mismatch here. Any other questions?

I have a couple of more, but I think they're for the next agenda items.

Then I'll come back to you in a second, but maybe, first, some others.

There are no other questions at this time. [Operator Instructions] There seems to be no further questions at this time.

Okay.

Then we'll go back to Jasper.

Jasper, back to you.

Can you hear me?

Yes.

Yes.

Okay. Yes. I'm not sure if there will be additional opportunities to ask questions at other agenda items. Or is this it?

Yes.

Certainly. Certainly.

Okay, then I'll wait for the adoption of the annual accounts. I have a couple of questions also for the auditor.

Excellent. So does it mean that, about the presentation of the Management Board, we don't have any further questions?

Correct. We have no further questions at this time.

Okay. Thank you very much. Then I move on to Item 2B, that's the report of the Supervisory Board on the financial year. It's also a nonvoting item, and it's submitted to the general meeting for discussion. 2020 has brought many challenges, with COVID-19 impacting people's lives and the global economy, as Joep was referring earlier. In managing the crisis, the health and safety of our employees and their families has been a constant priority. The outbreak of COVID-19 calls for close monitoring by the Supervisory Board. And therefore, we had various in-depth discussions between the Executive Board and the Supervisory Board. And under supervision of the Supervisory Board, management implemented strict operating procedures, rolled out contingency plans and performed various scenarios to estimate the potential financial impact of COVID-19, and I'm now talking about almost a year ago. In addition, the Supervisory Board also provided oversight and evaluated progress on performance relevant to a number of previously determined focus areas, and I'd like to mention 4. First of all, of course, the integration of INTORQ, a company we acquired in Q4 2019; the merger between IMS and ICS in the Industrial Actuators and Control unit; the expansion of the organization in China; and advancing the Automotive project pipeline and redirecting the R&D function. And we're very pleased to see that, in spite of COVID, important progress has been made on all these items. So that's quite an achievement, I can assure you. I'm not going to in too much detail, but if you want further detail, we have made a sort of an extension of what happened in the report of the Supervisory Board, which is in the annual integrated report on Pages 77 through 84. And I'd like to add that I -- and we are also very much pleased with the fact that we did not only focus on the short-term issues, but we also were able -- in spite of all the unexpected scenarios, able to keep track on our long-term perspective and didn't compromise too much on the plans we had in execution. And you have seen a further explanation in the presentation of the Management Board. For 2021, we have defined a few new items or additional items. The first one is maintaining up-to-date contingency plans in managing the effects of COVID-19 and securing the company's continuity. Because we are on track, and there is light in the tunnel, but of course, it's not -- it's still not behind us, so we have to be cautious here that we don't jump to conclusions too early. The second point is extremely important. The continued investment in China to support the realization of our growth strategy because China is extremely important in realizing our long-term targets. The third thing is the first important step in what we call the revision of the manufacturing footprint in Europe. And that's the closure of our production facility in Eibiswald, which needs to be managed very clearly from a human point of view, but also from a business continuity point of view. And last but not least, we have a quite advanced IT strategy ongoing, and it's extremely important that, that is implemented on time and in the right context. In retrospect, 2020 has been a turbulent year for everybody, but certainly also for Kendrion and its employees. And I'd like to mention that we've seen a high level of flexibility, both with management and our employees. So we're very grateful for their contribution in this very dynamic year. But we also like to express our gratitude to our shareholders, who already showed, with the acquisition at the end of 2019, their support. But also kept confidence and supported us during this rather difficult challenging 2020 and kept trust in our strategy, in management and the belief that we're going to realize our long-term targets. Any questions about feedback of the Supervisory Board?

There are no questions at this time.

So it was crisp and clear. Thank you very much. Then we move on to what is always the highlights of the meeting, and that's the remuneration report, important and sometimes complicated. That's why Marion was sitting next to me to handle that. It has been submitted, the report 2020, to the shareholders for an advisory vote. It's good to mention that it includes an overview of the remuneration of the members of the Executive Board and the members of the Supervisory Board. And as before, Marion Mestrom, in her position as Chairman of the HR Committee, will give you some further explanation. Marion?

Thank you. The remuneration for the Executive Board related to the base salary, in response to the COVID-19 crisis, Kendrion has taken a range of measures to protect its financial position. Measures included the implementation of a strict cost control program. As part of the COVID-19 cost control program, the members of the Executive Board agreed to a temporary reduction of their base salaries. During the months April to July 2020, a base salary reduction of 15% has been applied. Due to the recovering revenue levels and positive profitability as of the end of Q2 2020, the temporary salary reduction was lowered from 15% to 10% in August 2020. As of September through the remainder of 2020, no salary reduction was applied. Therefore, the actual gross base salary of the CEO in 2020 amounted to EUR 517,916.67 as opposed to the agreed annual gross base salary of EUR 550,000. For the CFO, the actual gross base salary in 2020 amounted to EUR 254,485.41 as opposed to the agreed annual gross base salary of EUR 270,250. The short-term incentive. The performance criteria for the 2020 short-term incentive have been set well before the COVID-19 pandemic started, consistent with the regular decision-making process of the Supervisory Board. The Supervisory Board could not have foreseen the COVID-19 crisis and the impact thereof. For the assessment of the actual performance against the 2020 financial performance criteria, certain adjustments have been made, which reduced the amount of the payout under the financial performance criteria by 15%. The adjustments that reduced the total amount of the payout of the financial performance criteria by 15% involved the following: in the first place, the amount of the impairment of capitalized development costs that has been normalized in the financial results has been fully reflected in the calculation of the actual EBITDA and EBITDA and invested capital for purposes of determining the actual performance against the financial performance criteria. In the second place, the actual free cash flow and invested capital amounts have been adjusted for the amount by which previously budgeted cash investments in fixed assets exceeded the actual cash investments. This has been done to take account of the reduced capital expenditures in 2020 as it was decided to suspend all uncommitted and nonurgent capital expenditures as part of the strict cost control program that was implemented in response to the COVID-19 crisis. The performance on the financial performance criteria for the 2020 short-term incentive resulted in a gross payout of EUR 226,600 for the CEO and EUR 65,130 for the CFO. The nonfinancial performance criteria for the short-term incentive have been closely aligned to the Supervisory Board's focus items for 2020 and annual strategic and operational spearheads. The 2020 nonfinancial performance criteria included the following: the integration of INTORQ; merging former business units, IMS and ICS, into Industrial Actuators and Controls; expanding the China organization, focusing on the local R&D organization and local purchasing organization; sustainability, focusing on energy efficiency, reduction of CO2 emissions, waste management and diversity; development of the new IT strategy framework; and last, the advancement of Kendrion's risk management framework. Achievement of an individual nonfinancial performance criteria is measured by applying a binary scoring model, where a nonfinancial performance criterion can either be Achieved or Not Achieved. The amount of the payout for the nonfinancial performance criteria depends on the number of achieved performance criteria. Based on the comprehensive review of the performance of the Executive Board, the Supervisory Board resolved that the CEO and the CFO each realized 3 out of the 4 nonfinancial performance criteria. Although important progress has been made on the China expansion and in the area of risk management, the Supervisory Board considers that the accomplishments do not justify the qualification of Achieved within the binary scoring model, where no linear scoring applies. The performance of the nonfinancial performance criteria for the 2020 short-term incentive resulted in a gross payout of EUR 132,000 for the CEO and EUR 37, 835 for the CFO. The overall performance under the 2020 short-term incentive resulted in a total gross payout of -- for the CEO, EUR 358,600, which amount represents 65.2% of the 2020 gross annual base salary of EUR 550,000. And for the CFO, EUR 102,965, which amount represents 38% of the 2020 gross base salary of EUR 270,250. Then the long-term incentive, consistent with a long-term incentive plan, 16,533 conditional performance shares have been awarded to the CEO under the 2020 long-term incentive plan. The number of conditional performance shares has been calculated on the basis of a target amount of EUR 330,000 and an average share price of EUR 19.96, measured during the fourth quarter of 2019. 6,769 conditional performance shares have been awarded to the CFO under the 2020 long-term incentive plan. The number of conditional performance shares has been calculated on the basis of a target amount of EUR 135,125 and an average share price of EUR 19.96, measured during the fourth quarter of 2019. The actual vesting percentage of the performance shares awarded remains conditional upon achievement of performance measured as relative total shareholder return, basic earnings per share and a nonfinancial measure in the area of sustainability. The vesting period expires at the end of 2022 upon expiry of the performance period. Long-term incentive 2018, pursuant to the 2018 long-term incentive, 6,960 conditional performance shares were granted to the CEO. The number of conditional performance shares was calculated on the basis of a target amount of EUR 196,360, and an average share price of EUR 38.79, measured during the fourth quarter of 2017. The vesting percentage of the performance share is conditional upon the achievement of performance measured as relative shareholder return, basic earnings per share, a sustainability target focusing on company culture. Both the score on the relative TSR and EPS measure fall below the threshold performance and therefore, result in 0% vesting. With the successful rollout of the global intercompany campaign, the Kendrion Way, and the additional initiatives that have been launched during the performance period, maximum performance has been achieved on the sustainability performance measure. As a result, under the 2018 long-term incentive, a total of 1,044 shares have vested, vested shares remain subject to a holding period until the end of 2022. Coming to the supervisory report remuneration, the base fee and committee fee levels for the Supervisory Board are the same as determined by the General Meeting of Shareholders in April 2017 and are as follows: a base fee of EUR 45,000 for the Chairman of the Supervisory Board, a base fee of EUR 35,000 for a member of the Supervisory Board. A committee fee of EUR 6,000 for the Chair of the Audit Committee and the Chair of the HR Committee. For the members of the audit and HR committee a fee of EUR 5,000. As part of the COVID-19 cost control program, the members of the Supervisory Board agreed to a temporary reduction of their base fee and committee fees. During the month, April through July 2020, a fee reduction of 15% has been applied. The temporary fee reduction was lowered from 15% to 10% in August 2020. And as of September through the remainder of 2020, no free reduction applied. For Mr. Ten Hove, Chairman of the Supervisory Board, the actual gross remuneration for 2020 amounted to EUR 47,087. For Mrs. Mestrom, Chair of the HR Committee, so for myself, the actual gross remuneration for 2020 amounted to EUR 38,608. For Mrs. van der Meijs, Chair of the Audit Committee, the actual gross remuneration for 2020 amounted to EUR 38,608. For Mr. Doll, who was appointed in June 2020 as a member of the Supervisory Board, a member of the Audit Committee the actual gross remuneration for 2020 amounted to EUR 27,666. For Mr. Wünsche, who stepped down in April 2020 the actual gross remuneration for 2020 amounted to EUR 18,500.

Thank you very much for being so transparent. I appreciate it. Any further questions?

We will take our first question from Jasper Jansen.

Also from my side, thanks a lot for the elaborate presentation and also for the transparency regarding the adjustments that were made to the metrics due to the COVID situation, of course. But I do think that if you just look at the ultimate size of the STI, the short-term incentive, it is the highest in 5 years. And I do wonder if there were any considerations made to even adjust the STI further downwards given the financial performance which can, of course, be explained due to COVID, but also the whole COVID situation. So that is my first question. And I have 2 additional questions regarding to the nonfinancial STI targets. And then I believe you already stated it, but with respect to the CEO, the progress on the expansion on China, there was not achievement, which could be explained by COVID which, of course, I can imagine. But given the importance of China in the growth strategy of Kendrion, could you take away maybe the concern that you have that shareholders could have with not achieving this target. So that's my second question. And my third question is on the nonfinancial of the CFO, which is, among others, development of a new IT strategic framework. And I believe if I understand your report well that there was achievement on this particular criteria. Now I do wonder if you can give a little bit more color on that, also given the fact that IT controls are still a key audit matter of the auditor, and he can still not fully rely on Kendrion's IT control systems. So I just wonder how those 2 things can be squared?

Okay. Thank you. So your first question related to the STI being the highest in a couple of years, and if we have considered to reduce even more, We, as Supervisory Board have considered all facts and came to the conclusion that we did the right thing. So there was -- and that's not STI related, but I'm looking at the total package then. There was a reduction applied over a couple of months. And we have been quite strict on the binary scoring method. So all in all, we feel and are convinced that we have taken the right decisions there as far as the STI is concerned and have been very objective in the judgment of that. Then the other question, focus on expansion in China, but there may be others can chip in as well. China is, of course, strategically important for us. But we are not concerned going forward. Of course, we always keep a critical look and that's for the Executive Board, the same for the Supervisory Board as well. But we see that we make progress in China, and have put a number of things in place that makes us feel comfortable that we will achieve our ambition as much as we can, but I would like to give the floor back to the Chairman, I was looking at you, finding the Chairman, because they can -- the others who can shed some more light on it.

I think you've been very clear, but maybe a few add-ons. To start with the last 2 things, the achievements of China and IT. What I said before is that we were happy that we continue to put focus on the long-term targets, but it doesn't mean that in terms of timing, everything has been realized in what we have agreed. And we have been very strict from both sides in how we look to what we have agreed. And if there is, for whatever reason, an extension of the timing and therefore, a certain target is not achieved, well, that's bad luck. I have to -- I can tell you, being 8 years in this position, I have also seen years where it was the other way around, where the results were from the outside would give the impression that the STI should have been higher than realistic. But also there, we said from both sides, that is how it works, it goes in 2 directions. So we have, in a very consistent way, kept ourselves very strict to what we have agreed, and we only made 2 exceptions on the rule and that has been explained. So I hope that gives sufficient answer to your question.

Yes. Thank you very much for this answer, and I appreciate the insight, but I'm not sure if I got an answer, what did you want to achieve last year that you couldn't achieve in terms of the China strategy? What is it? What can I think about?

When you talk about an action program in China, for instance, you agree about the budget, about an action plan and about timing. And if on 1 of those 3 there is a difference in a negative way what we have agreed, then you're not fulfilling your target. And I think the timing issue is here the most important one. And of course, you can say that was this something management could have known because of COVID? No. But again, Coming back to what I said before, that is what we have agreed for good and for bad. So it's more a sort of a timing issue. And then you shouldn't think in years, but you should think in months, and we're quite optimistic that we're going to catch up this year. So you shouldn't be concerned.

Thank you. And I also appreciate that you're straight, and then maybe on the IT question. So why was that achievement?

Now that's the same, basically. So also in -- we have a very, very broad company IT program. with a number of initiatives. And also here, because of COVID, because of limited interaction, because of the fact that we had to change in quality and quantity, we have bring in competencies that all created some delay, but also here, the consequence of not achieving those targets was a timing issue. But also here, you shouldn't be concerned that we are deviating too much from our IT program going forward.

There was achievement regarding IT but it's just hard to square with the remark of the accountant.

The remark of the accountant?

With respect to IT controls, that he still can't fully rely on the IT systems?

Yes. Maybe just to add Jasper. So the IT framework target is in itself much, much wider than only dealing with the IT controls. So we're talking here about our application estate digitalization generally having an IT organization that adds value to the business. So there, we made great progress. You are right. So still, the auditor was not able to fully rely on IT controls. Having said that, that so its name is IT controls, but it's basically a mixture between organizational controls and IT controls. And it's more or less a trade-off between flexibility and control. So it's also not that the accountant cannot completely not rely on the IT controls. They do perform additional procedures, such as sample checks, which cost additional time for the auditor to get to the same results. It also takes more time for our controllers. So we have a shared interest to make sure that in the near future, the auditor will be able to rely fully on those IT controls. But it's not the only item in improving the IT framework.

Okay. Does that sufficiently answer your questions? Any other questions on remuneration?

There are no further questions.

Okay. Thank you very much. Then let me give you the outcome of the e-voting and the proxy. The proxies granted to the company secretary. We have 9,728,349 shares in favor of the remuneration report that is representing 93.93% of the total voting cast. In addition, we received 628,351 votes against and we had 2,357 abstentions. So you can conclude with me that the proposal has been adopted. Let's then continue with Agenda Item 4, and that is the adoption of the 2020 financial statements. They have been submitted to the General Meeting of Shareholders for adoption. They have been approved in an earlier stage by the Supervisory Board and equally important, audited by Deloitte Accountants and accompanied by an unqualified auditor's report. It has been proposed to the General Meeting of Shareholders to adopt the 2020 financial statements. But before I continue with the voting results, I would like Mr. Beemer of Deloitte to provide some comments on the audit procedures he carried out with Kendrion.

Good afternoon to everybody. As a quick introduction, my name is Rick Dekker. I'm not the standing partner on behalf of Deloitte Accountants, that indeed is Barry Beemer. Barry, however, was experiencing some technical difficulties, he was on his way to my home, but unfortunately, will not make it on time. So I will talk you through our part. Barry took over the role from B. E. Savert who has been serving Kendrion for the last couple of 5 years, but had to rotate off due to mandatory independence requirements. As part of the transition, we laid out a detailed plan to make sure that this was a very smooth process. And in the next couple of minutes, I would like to talk you through some of our key audit considerations, which are also shown on the slide I hope. To start with our conclusion, on February 18, we signed our unqualified opinion as included on Page 181 in the annual report and onwards. And this, of course, was our primary subject was the audit of the set of the financial tables. In this, we also considered other information included in the annual report, included in the report of the Executive Board, the report of the Supervisory Board, and the company's remuneration report. The other information we verified were the legally required information was included and whether there were any or no inconsistencies with the financial statements. And the third subject was the sustainability report, which covers limited procedures on a couple of specific KPIs, which you can find on Page 192 and onwards. Throughout the audit, we had pretty good interaction with the management board and some members of the Supervisory Board. Amongst others, we discussed our key deliverables with the audit committee being our audit plan through management letter and the Board report, and we also had the opportunity to speak to the Chair of the Audit Committee without the management being pressured. Then a little bit more on our materiality. We used a materiality of EUR 1.2 million, which was the same as prior years. And for consolidated subsidiaries a lower materiality is applied, which did not exceed the amount of EUR 540,000. I would like to point out that this was the maximum amount, but for a lot of components we used an even lower materiality. We agreed together with the Supervisory Board that misstatements in excess of EUR 60,000 which are identified through the audit will be reported to them as well as smaller misstatements within our field must be reportable on qualitative grounds. Then a little more information about our group audit approach. During our audit, we had 15 components, which were a full audit scope. These covered 96% of the consolidated sales. In this, the largest components were in Germany, United States, China and Austria, which make up the better part of this 96%. And in our audit approach, we obviously also considered the COVID-19 developments. We had hope, of course, that we would have been able to travel to the most important components within the group, but that unfortunately wasn't an option. Our Chinese audit team was already confronted with these limitations in travel and client access last year, but all our audit component teams had similar issues during the 2020 or onwards. To overcome this, we have made more frequent interaction with the components and performed remote following on both planning, interim or year-end or a combination of those both. And the remote working environment had in our opinion no impact on the quality of our audit. As a group audit team, we also performed a couple of procedures centrally, amongst others, the audits of the U.S. component Shelby and a number of topics from as wellbeing, for instance, the purchase price allocation and the goodwill impairment. For smaller entities, we performed analytical procedures at the group level. Then going towards the key audit matters. Last year, we reported 2 key audit matters being the goodwill impairment and the general IT environment, and these 2 key audit matters were still applicable in our 2020 audits. In addition to that, we also add 2 new key audit matters, namely the purchase price allocation of INTORQ, which was acquired in 2020 and the revised bank covenants. Maybe a little bit more information why these 2 additional key audit matters. With respect to the PPA of INTORQ, this acquisition was a significant one for the company and had a number of implications for our audit. Firstly, auditing determination of the purchase price and the necessary purchase price allocation, what is complex and includes judgment. And next to that, we also had to plan the nature, timing and extent of the audit of the INTORQ entities in accordance with the ISO 600 group audit standards, which as a result, added 2 additional components in our group scoping. Then on towards the bank covenants, I do want to stipulate that although Kendrion currently operates well within the existing leverage covenants, we deemed this to be a key audit matter as we really needed to get a good understanding of these covenants and there are also relevant accounting and disclosure requirements relating to this. With that, I would like to close the overview of the audits. And thanks very much to your attention.

Thank you very much. And certainly, also for stepping in so quickly. Any questions for Mr. Dekker?

We will now take the question from Jasper Jansen. Please go ahead.

Thank you. I have a couple. The first for Kendrion. Just on the INTORQ acquisition and how much is paid basically? Because if you look at the cash flow statement, it says acquisition of subsidiaries is EUR 77.7 million on Page 105 but then if you look at Note 22 on the business combinations, it says that the total consideration paid for INTORQ is EUR 64.8 million. So I just wondered how the difference can be explained. So that's my first question for management, I think. And then just 2 for the auditor. And the first is who is the component auditor in China? Is that also Deloitte and maybe you can give some color on that? And then just secondly, on the key audit matter of goodwill for the automotive business. And first of all, I want to say that we welcome and appreciate that there is more information given than we see in other key audit matters. So this is something we really appreciate. But we do have the question how it could be that last year, there were no reportable findings with respect to the goodwill of Kendrion. And For automotive, there was a WACC use of 8.5%. And now it was raised substantially to 9.9%, and now it is basically considered too low by the internal valuation experts of Deloitte. So I just wonder how could you square this? What changed in assumptions surrounding the WACC of automotive that suddenly the higher WACC now is still considered on the low side by the auditor. So those were my questions.

Yes. Thank you very much. Shall we start with the questions to the auditor to Rick. And the first 2 questions, who is the auditor in China and the second one is about the WACC.

Yes. So maybe on the first question, indeed, Deloitte was the component auditor over there as well. We -- actually, we use the same team, which was also responsible for Kendrion China. They also performed the audit work in China. I hope that answers your question. So we have been working with them in the last couple of years. So that made the transition to INTORQ also pretty easy and feasible for us.

The second question about the WACC.

Yes. So our approach was consistent to last year. We asked our internal valuation specialist to determine the WACC, and there have, of course, been some changes in circumstances due to market developments, and that indeed led to a different WACC than last year in this case, meaning a higher WACC.

You want to add something to that, Jeroen?

Yes. I think -- so obviously, we had a discussion with Deloitte on that. And the major difference is the small company premium that Deloitte adds which is higher than the one that we have added and that has to do with also the lower share price during a large part of 2020. But I think, yes, as you probably also know, Jasper, determining of our cases, it's like a religion. It seems very fact-based, but everybody has their own opinion, you ask 10 people to calculate a WACC, you get 10 different answers. But I think also Deloitte did an exercise what would have been -- would there have been an impairment if we went to the upside of their range, and that still would not have been the case.

If I may, one quick add on this. Just -- so what is the firm specific percentage premium used like or I can understand the difference is 1%, so I only need to know the ones Deloitte uses or Kendrion uses? Is that something you're willing to share?

Yes. For me, it's no big secret. So we used 3% and they used, I think, 4-point something.

Yes. Okay. Then there is a question about INTORQ.

Yes. So the difference between the 78 is to keep behind.

Sorry, what did you keep behind?

Nothing because there is a good explanation. The difference is the debt's taken over. So the purchase price, including the debt taken over was 78. And excluding the debt taken over was something -- the amount you said 64-point something.

Any further questions?

And maybe since I'm the only one, I can squeeze in one more maybe. And that's just on the adjustments made in CGUs with respect to the goodwill. Did you do an analysis what would happen if you would not have changed the CGUs and if impairments were required then? Or is that not the case?

No. It's also not required, but I do not think that would have had an impact.

Okay. Then I take it that we don't have any further questions.

There are no further questions.

No. Thank you very much. Then I give you the voting results, voting, e-voting and proxies granted to the company secretary. We had 10,355,471 shares voted positively on the adoption of the 2020 financial statements And that is almost, I have to say, 100% of the voting cast because we had, in addition, 3,586 abstentions, and you can't explain that in percentages, but it's almost 100%. So that's quite some support. Thank you very much for that. So the proposal has been adopted. Then we move on to Agenda Item 5, that is about dividends, and it contains 2 parts: The dividend policy; and the dividend over the financial year 2020. Let's start 5A with the policy. It is a nonvoting item. It has been submitted for discussion. In accordance with the Dutch Corporate Governance Code, the dividend policy is dealt with and explained as a separate agenda item at the AGM. Kendrion endeavors to realize an attractive return for shareholders, supported by a suitable dividend policy. And in view of safeguarding a healthy financial position, consideration is also given to the amount of profit that needs to be retained to support Kendrion's midterm and long-term strategic plans and to maintain a solvency ratio of at least 35%. Kendrion strives to distribute dividends representing something between 35% and 50% of its net profit. In principle, Kendrion offers shareholders an opportunity to opt for dividend in cash or in the form of ordinary shares. And the policy is like a lot of other things published on our website and described on Page 22 of the 2020 annual integrated report. Are there any questions on the policy?

There are no questions at this time.

Then we move on to the actual situation about 2020. The proposal to distribute dividend over the financial year has been submitted to the General Meeting of Shareholders as a voting item, taking account of the encouraging financial performance over 2020. Kendrion's strong financial position and the expectation of a continued recovery during 2021. The Executive Board with the approval of the Supervisory Board, proposes a dividend of EUR 0.40 per share, representing a payment of dividend of 50% of the normalized net profit for 2020. It's at the high end of the range of our dividend policy. The total dividend amount of EUR 5.9 million -- the total dividend amount is EUR 5.9 million. It is proposed the payment of the dividend is made in cash or at the option of shareholders in the form of ordinary shares. By the way of transfer of treasury shares or to the extent necessary issuing of shares with any remaining fraction to be settled in cash. The ex-dividend rate is the 14th of April 2021, and the record date is the 15th of April 2021. The share dividend will be set on the fourth of May 2021 before starting of trading. On the basis of the volume weighted average price of all Kendrion shares traded on the 27, 28, 29, 30th of April and the 3rd of May of this year at a level whereby the value of the dividend in shares will be virtually equal to the cash dividend. The period for shareholders to elect share and/or cash dividend runs from the 16th of April up to and including the third of May until 1500 hours. The cash dividend will be made payable and the share dividend will be delivered on the 6th of May 2021. All these dates can be found in our financial calendar on the website and in the annual report. If the proposal is adopted, the dividend information will be published on the website tomorrow. The remaining net profit for 2020 will be added to the reserves. Any questions on this proposal?

There are no questions at this time.

Okay. Then through e-voting and proxies, we got 10,359,057 shares in favor, and that is -- and I think it's the first time I see this, 100% of the votes. So thank you very much for your extremely uniform support. The proposal, of course, has been adopted. Now we move on to agenda Item 6, and that has, again, 2 parts: Discharge of the members of the Executive Board; And discharge of the members of the Supervisory Board. Let's start with the Executive Board. The proposal to discharge the members of the Executive Board who were in function during the financial year 2020 has been submitted to the General Meeting of Shareholders as a voting item. It's proposed that the members of the Executive Board, Mr. Joep Beurden and Mr. Jeroen Hemmen will be discharged from liability for the management of Kendrion and its activities during 2020. Are there any questions before I give you the voting results?

We will now take a question from Henk Rinks.

Hello, Mr. Rinks, are you with us?

Mr. Rinks, I have allowed you to talk. You just have to unmute yourself. It seems that he is not asking a question anymore. Then there are no questions at this time.

Okay. So no questions. Then the results of e-voting and proxies. 10,350,812 shares in favor to discharge the members of the Executive Board that is 99.97% of the votes casted. We received 3,490 votes against and 4,755 abstentions. Therefore, the proposal has been adopted. Thank you very much. 6B, discharge of the members of the Supervisory Board. The proposal to discharge the members of the Supervisory Board who were in function during the financial year 2020 has been submitted to the General Meeting of Shareholders as a voting item. It is proposed that the members of the Supervisory Board Mr. Doll, Mrs. van der Meijs, Mrs. Mestrom and Mr. Ten Hove as well as the former member, Mr. Thomas Wünsche, will be discharged from liability for their supervision on management during 2020. Any questions on this item?

There are no questions at this time.

Then we have 10,350,812 shares in favor of the discharge of the members of the Supervisory Board. Again, 99.97% of the votes casted. We received 3,490 votes against and 4,755 abstentions. Therefore, this proposal has been adopted as well. Thank you very much. Then a very important item on the agenda now is Point 7. The appointment of Mr. Frits Van Hout as a member of the Supervisory Board, this proposal has been submitted to shareholders for adoption. Last year, I announced to step down as a member of the Supervisory Board upon expiring of my second term being the date of this general meeting of shareholders. And I -- but we all are very delighted that Frits Van Hout is a seasoned professional with international experience and known for his extensive technical expertise, his design and development experience and last but not least, also his result-oriented leadership style is willing to join the Supervisory Board. And the proposal is to appoint him as a member of the Supervisory Board for a 4-year term ending on the day of the Annual General Meeting of Shareholders to be held in 2025. Subject to appointment of Frits Van Hout as a member of the Supervisory Board, the Supervisory Board will elect him as Chairman of the Supervisory Board and also a member of the HR Committee. Before we allow you to ask some questions, maybe this is a good opportunity to ask Frits to introduce himself to you.

Thank you, Henk. Good afternoon, everyone. My name is Frits Van Hout, 60 years of age. I'm married with 2 children who are no longer at home. I studied Physics at Oxford University and later at the ETH in Zurich. I joined the company, ASML in May 1984, when it was founded. First an R&D job later on international programs, followed by a sales assignment. I then joined 2 small companies in Switzerland and the U.K., where my main job is to integrate 3 companies into one. And then again, the second company also 3 companies into one. I rejoined ASML in 2001, initially as Head of Customer Service, then became the head of one of the business units, did sales and marketing, became a member of the Management Board of ASML, and took on jobs, again in sales and marketing, EUV, our latest technology, which was introduced in 2018. And finally, strategy and supply chain management. Stepping down this month, at the end of this month at the AGM of ASML, and I'm looking forward to joining with your permission Kendrion. Kendrion, I think, is a relatively small company. The management is close to the customers, the market with products just like ASML was and maybe to some extent, still is. There are major points of inflection that are coming up in automotive, particularly where electrification, assisted driving, obviously, will change the markets and offer huge opportunities to those responding in agile way. I hope to be able to help the company with my expertise and experience in R&D, marketing and sales, product innovation, and setting up sales and sourcing partnerships, and I look forward to working with all stakeholders, including yourselves. Thank you.

Thank you very much, Frits.

Welcome.

Any questions about this proposal?

We now take the question from Jasper Jansen.

Thank you very much for the introduction. And I very much think this is a very good candidate. So we're very happy about it. But it's rather unusual to directly appoint a new member as a Chairman. So maybe you could give a little bit insight in the consideration to appoint Mr. Van Hout as a Chairman immediately.

Yes. First of all, I was hoping you didn't use the buts, but now you have used the but, of course, we're going to answer it. Marion, do you want to say something about it?

Yes. So I'm more than happy to take this one. Mr. Henk Hove who commenced his second term as a member of the Supervisory Board in 2016, previously announced that he would step down upon expiry of the second term. After this announcement, the Supervisory Board started a thorough selection process for a new Supervisory Board Member and Chairman. The Supervisory Board and the Executive Board are very pleased that Frits van Hout has accepted the nomination for appointment. Frits van Hout is a seasoned professional with relevant international experience and expertise. With his extensive experience and expertise, he's considered the best candidate for the position of the new Supervisory Board member and Chairman. Frits van Hout will as a new member and Chairman contributes to Kendrion's continued journey towards achievement of the strategic objectives of Kendrion. So that's, for us, more than enough reason to appoint a person from outside as the Chairman of the Supervisory Board of Kendrion.

And maybe needless to add, Marion, that, of course, in this whole process, the whole Supervisory Board was aligned continuously and that the decision to make this proposal has been very much uniform.

Yes, absolutely.

Unanimous. Yes. That's sufficient?

That's sufficient.

Okay. Anything more about this?

There are no further questions.

No further questions. Then again, the e-voting results. We received 10,352,035 shares in favor of the appointment that is 99.94%. It's higher than the support I got 8 years ago. But -- and here is the but, we received 6,245 votes against. And obviously, the representation of those votes are not present in the call and we got 777 abstentions. And it's clear that with enormous support the proposal to appoint Frits as a member of the Supervisory Board and later on as Chairman has been supportive. Congratulations. Thank you very much.

Chairman. Before we move to the next agenda item, I would like to take a minute. Frits, I would like to welcome you on behalf of the Supervisory Board and also of the exec -- on behalf of the Executive Board as a member of a Supervisory Board and as the Chairman. And we are really pleased that you joined Kendrion in the Supervisory Board and also delighted that you can bring your experience, which is very valuable for us to the table for Kendrion. So thank you very much and good luck. And then, Henk, yes, I would like to -- on behalf of all the Supervisory Board members and the Executive Board, to thank you for being 8-years a member and Chairman of the Supervisory Board of Kendrion. We had the joy to experience your insights and enjoyed working with you. So thank you very much. We will miss you, but we wish you all the best for the future, and we hope our paths will cross again. Thank you very much.

Thank you. Thank you. I'm going to say a few words later on if you don't mind, but I'd first like to finish all the critical things we still have ahead of us before closing this meeting. So after these beautiful words, of Marion, I move on to Item 8, and that is the reappointment of Deloitte as an external auditor of Kendrion. The reappointment of Deloitte as an external auditor of Kendrion has been submitted to the General Meeting of Shareholders for adoption. Deloitte Accountants was appointed -- was reappointed in 2018 for a term of 3 years, meaning the period '18 to 2020. The Executive Board and the Audit Committee of the Supervisory Board have evaluated the activities performed by Deloitte Accountants and based on the outcome of the evaluation and the recommendation by the Audit Committee, the Supervisory Board proposes to reappoint Deloitte for the third, but also a final period of 4 years after 2020. And that means for the financial years '21 to '24. Any questions?

There are no questions at this time.

Okay. Then I can report that through e-voting and proxies, we got 10,357,880 shares in favor for this reappointment which is in percentages almost 100% because we received 1,169 abstentions. But with this result, the proposal has been adopted. Thank you very much. Then we move to Item 9 of the agenda. That is the authorization to issue shares and to restrict or exclude preemptive rights in 2 parts. First one to issue the shares. The proposal to authorize the Executive Board to issue shares and to restrict or exclude preemptive rights has been submitted to your meeting. It is proposed to authorize the Executive Board for a period of 18 months from the date of this meeting to issue shares or grant rights to acquire shares subject to the approval of the Supervisory Board. This authority relates to a maximum of 10% of Kendrion's issued share capital as at the 12th of April this year, increased by the number of performance shares to be issued pursuant to share-based incentive plan for employees and the Executive Board's long-term incentive plan. As a separate voting item, it's proposed to authorize the Executive Board for a period of 18 months from the date of this meeting to restrict or exclude preemptive rights in relation to the issue of shares or the granting of rights to acquire shares subject to the approval of the Supervisory Board. Before I give you the voting results, any questions?

There are no questions at this time.

Okay. We move on with the results. Through e-voting and proxies, we got 10,356,056 shares in favor, that is 99.98% of the votes casted. In addition, we received 2,349 votes against and 652 abstentions. And I can confirm that the proposal has been adopted. Then through -- for the proposal to authorize the Board to restrict or exclude preemptive rights in relation to the issue of shares or the granting of rights to acquire shares. We received 10,356,989 shares in favor, at 99.99% of the votes casted. We got 1,291 votes against and 777 abstentions. Therefore, both proposals have been adopted. Then we move on to Item #10. That's the authorization to repurchase Kendrion shares. The proposal to authorize the Executive Board to repurchase Kendrion shares has been submitted to the General Meeting of Shareholders for adoption. It's proposed to authorize the Executive Board for a period of 18 months from the date of this meeting to acquire Kendrion shares up to a maximum of 10% of the issued share capital as of the 12th of April this year, either by purchase on the stock exchange or otherwise at a price that doesn't exceed 110% of the opening price quoted on the Euronext Amsterdam market on the day of the purchase of the shares or in the absence of an opening price, and most recent price quoted on the stock exchange. The exercise of the authorization by the Executive Board is subject to the approval of the Supervisory Board. Any questions on this proposal?

There are no questions at this time.

We received 10,357,588 shares in favor. That is almost 100% of the votes casted, rounded up. The proposal received 119 votes against and 1,315 abstentions. So therefore, the proposal has been adopted. Thank you very much. Then we are at Item 11. Any other business. Any questions we haven't answered earlier, you would like to raise under any other business?

There are no further questions.

Thank you very much. Well, then I can take a few minutes more for my last words. Indeed, it is 8 years since I started as a Chairman of the Kendrion organization. At that time, under the leadership of Piet Veenema and Frank Sonnemans as CEO and CFO. And if I compare the situation of the moment I started with what we see today, there have been tremendous changes over all these years with the market sometimes going up and sometimes going down. But what it is, for me, the most important thing is that we have a company now after all these years, who is -- seems to be ready for the future, which doesn't mean that everything which we have to clarify is where it should be at the moment. But we are on a path of a continuous improvement process. We have made structural changes, especially when you came on board with this plan of simplified focus and growth, we've seen tremendous organizational changes, but also business focus going along with that, which has brought the company where it is now, a company which has challenged even something like a COVID pandemic, which was certainly not easy to go, which have kept track on the business, is now back in a very clear strategy going forward with 3 business units, which has brought China back to life compared to a period, the previous period where we hardly saw any improvement. And we're now on the track where China will -- is and certainly will become one of our most important regions. So I'm extremely happy for all the work which has been put into the company, especially by Joep. And certainly, last but not least, by Jeroen. I think we can have a lot of confidence in this duo together with the management board around them in delivering to promise. And again, we're hopeful not only, but we're also expecting that after this simplifying focus now the growth is in hand or in reach, how to say. And then a few words to my colleagues, Marion, Jabine, and certainly Erwin, who I only met once, because of this pandemic, but it feels as if I know him already very long now in it is -- of course, it's business. It goes along with rationality. But if you have -- if you enjoy what you're doing, it also has to do with the people around you, and I very much appreciate working together with you. We have been, from time to time, critical to each other. We have been pushy, but we also, above all, have been constructive and positive in supporting ourselves and the management board in driving this company forward. And I'm very happy that I could work together with you. And before I go to our shareholders, I go to Yvonne, who has been our Corporate Counsel for the last so many years, I'm inclined to say 8 years, but that's not right, she is shorter, but it feels much longer. She has not only been a fantastic Corporate Counsel, and corporate counsel is very important for the Supervisory Board. I'm not saying it's the link to the Management Board, but certainly, it's -- she is carrying the oil can in an organization between Supervisory Board and Executive Board from time to time and she did it in a fantastic way. But besides that, she's not only the corporate council, but she also has a broad level of interest and that is reflected in a number of other responsibilities she is carrying in the company in a very successful way, Yvonne. We are now on -- we have eye contact. Thank you very much for your contribution. And then to our shareholders, last but not least, we're happy that we have a number of very loyal shareholders, and there are a number of large shareholders like Teslin, like Kempen, like Nationale-Nederlanden the former Delta Lloyd and a few others add value, but also the individual shareholders. Some of them, most of them who stayed with Kendrion for a very long time. And we have seen the share price going up and down. And most of them have kept their trust in the company, in management and our strategy, which has been reflected in -- especially also what happened during the acquisition of INTORQ in a very difficult moment, where we got full support of doing this acquisition. I'm very grateful for that. And I think it's a fantastic token of confidence going forward for management in realizing their ambitions and their plans. Thank you very much for that, and I wish you all the best.