Mutares SE & Co. KGaA (MUX) Earnings Call Transcript & Summary

Welcome, dear, ladies and gentlemen, to our Capital Markets Day here in Frankfurt, and welcome also on the screen. I'm Robin Laik. I'm the Founder of Mutares Group, also the main shareholder and the CEO. And when I look back now on the last 16 years, and maybe it's also interesting to share this with you, why do we do all this restructuring? Why do we -- are we so active in the turnaround? It's important to understand where I personally come from. For my dad, he came from a very rich Indian family. In India, we had several companies. We had copper mines, coal mines. We were running the Hindu temples. It's a Hindu priest family. And then the communism came and everything was nationalized. And my mom, she come from Berlin in a lawyer family, also a very rich family. The grandfather, he was in the second world war. And then the grandmother, she left Berlin and came to Bavaria. Why? For the Russians were coming, and then communism came. So both parents lost a lot of money due to the communism. And I grew up in a rented apartment in Munich. And then I studied business, and I always wanted to make cash. So my mother, she sent me to the IDS in Germany, not to the expensive restaurants, shops. And then I got 50 German marks. And with these 50 German marks, I did the shopping. I know how to save cost and how to buy as cheap as possible. And this mentality helped me to do the tax declaration of my parents when I was 15. And this first money I earned, I bought my parents a house. And then I came to different businesses. So I started at L'Oreal Group, then I went to Escada Group. And I was always in charge for underperforming assets. What do you do with companies which have negative cash flows? This is my personal background. So I was running then a company -- a perfume company for Escada, a company EUR 50 million in sales but EUR 10 million of losses. What to do with such a company? So as a restructuring manager, what you do in the beginning? You reduce cost. So I had to close down the factory in France and I went for external supply. So I exited the U.S. market. In the U.S., the marketing expense was so high. And finally, after 2 years of restructuring, the company was like breakeven. But then when a company is breakeven, you can think about as a turnaround manager, as a task force manager, as a head of M&A, you can also think about an exit. What do you do? Can you maybe exit this company? And then we sold this company to Wella Group. And selling this company to Wella Group doesn't only bring us a high purchase price. It brought us a long-term license agreement, royalty agreement. And all of a sudden, this was the most profitable business within the Escada Group. And that's why 16 years ago, I was standing on my kitchen table, together with Wolf Cornelius, one of my senior employees today. And we were drinking a bottle of wine and then we said, why don't we do it for ourselves? Why don't we build up the structure Mutares and we go to these big corporates. If you ask this big corporates, do you have underperforming assets? Companies that do not work, negative cash flows, profitability is not there anymore. And we take over the burden that you have to support the losses of these companies. And we enter into these companies with our own teams. In the beginning, it was only him and me. And then we do the restructuring. And this was the start of Mutares. And we called today's Capital Market Day, hopefully, you can see here. We call it the buffalos of European Private Equity. And why have we decided for this name? For -- another personal story, my daughter, we have 4 children. I'm married. And my youngest daughter, she went to the U.S. And she was in Colorado. And as we have a house in the Bavarian mountains, we go very regularly skiing. So the first thing she did, she bought ski equipment and she bought a season pass to go in the Rocky Mountain skiing. And one evening, she called me, Dad. If you all heard now about the thunderstorm in Florida and in the U.S. She said, dad, there's a thunderstorm coming. And the winter storm comes. And in the U.S., there are winter storms, especially in the Rocky Mountains, can be minus 40 degrees. And she asked me what to do. And I said, darling, please take a room, stay in the hotel. And the next morning, you can go skiing. And that's exactly what she did. And then I heard a story. And the story is that there are storms, thunderstorms, winter storms in the U.S. And we have in the U.S., two different kind of herds. One herd is a herd of the wild buffaloes. And the other herd is the herd of the normal ordinary cows. And you know what happens, when the winter storm comes, the normal, the ordinary cows, like 50% of the cattle, they die when the thunderstorm attacks them. And only 2% die from the wild buffaloes. And the key question is why is this the case? And the answer is very easy. The normal ordinary cow runs away, and 5 hours later, the storm attacks them and they don't have any resistance anymore. And the wild buffalo, he hears that the thunderstorm is coming, and he runs directly into the storm. And what we are doing here at Mutares, with our 250 people, we go directly into the storm. For what we are doing, and this is what we all have to have always in mind, we buy companies which are not performing, where you have a substantial severe issue. And we ask the seller to fund these businesses even with cash. This is what we are doing. We go directly into the problem. When we bought now two companies. And this is, for us, really a challenging week. So when I heard that we have Capital Markets Day this week, I thought this is also for Mutares stuff. We do a lot of things. But this week, we already acquired two companies. You can see here Buderus. And you can see Metalltechnik, two companies, one EUR 350 million in sales, the other EUR 160 million. Big corporates. But we would not have bought them if they were not substantial issues with these companies. And our team is going to the supplier, is going to the customer, is talking to the unions and has to convince all stakeholders, that's our job. We go directly to the people. And after 100 days, we know our plan, we bring transparency into these companies. And next to these big transactions that we did on the buy side, we also opened the books today for our IPO of our Austrian Steyr Group. So the books for Steyr are opened. We want to sell like 5.2 million of shares for a share price of EUR 14. So if here investors are listening and if you're interested, how can, Aufhäuser is our financial partner in this transaction. And we hope that we still stay a majority stakeholder as Mutares because we believe that there's a big opportunity for all investors in this transaction. And this transaction is open since today. So what is our Mutares business model? So what we do, we go to these big corporates and we ask these big corporates, do you have companies that do not work? And then we show them our business plan. And we ask them, "Can you give this company to us." But it's -- our business model, per se, is risk averse. Why? For we ask the seller to fund the business with cash to do the restructuring. So we ask in 100% of the transactions. We have a bad will. What does it mean? This means that the purchase price that we pay is not as big as the equity of the company that we buy. And this -- it's like in 100% of the cases, that's the case. So we buy a company, and we don't buy the company as Mutares Holding directly. What we do, all of these companies are ring-fenced. We are not obliged to inject money into these companies. There is no profit sharing agreement. All of these companies are held via shelf companies. If we invest, and we have invested now EUR 600 million into the total portfolio and purchase price, in acquisition and loans and so on, this is our free will to decide whether we go for an add-on acquisition, whether we want to invest, whether we want to inject. But we are never obliged, like a big corporate, due to a profit-sharing agreement to put money into these companies. And we do not buy only in one industry. I mean, European automotive companies, they do suffer a lot. I mean, all of the German OEMs but also the European OEMs. Why? For electric mobility is not working. And this is not only in Germany, this is all of Europe, this is tough. But we do not invest only into Europe and we do not invest only into auto. We have four different sectors: early cycle, non-cycle, late cycle and cyclical business. This is important for us. So we want to avoid risks and we do not invest -- I started the business in Munich. To date, 12 European offices, an office in India, an office in China and an office in the U.S. We are not dependent on one market and we are definitely not dependent in one sector. This is our business model. And we have generated last year EUR 100 million net profit. How can we generate EUR 100 million net profit with underperforming assets, with companies that do not work? What we do, we send our own team, and we have like 150 operational consultants on our payroll. And we send them. These are my buffaloes, and we send them into these companies to make the turnaround in these companies. And this is our consulting income. And we do generate more than EUR 100 million on consulting income on a yearly basis. This is -- the first source of our profit is our consulting income. Next stream of profit is dividends. In this -- in our calculation, we calculate like EUR 25 million of dividends said we'd generate on a yearly base. And thirdly, we have exit proceeds. And by doing so, we were able to bring this company to EUR 100 million net profit. So what is our vision? Our vision is that when a big corporate wants to exit a company, if it's now globally, they should think about Mutares brand and they should sell it to us. And this is first in mind, first in choice. We want to have a reputation and this is very important. You will see that we did a lot of privatizations from The States in the last years. This is important that this works out. For reputation is, for Mutares brand, very important. And how do we do this? And here, we talk about entrepreneurship. We want to make the company profitable again with very logical measures. We put someone in from Mutares team who sits on the cash position. And he tells to the people, we have amount X now. We have to restructure the business. I cannot spend more than what's coming in. Cash flow management is #1. I always say, we run the companies like I run my household myself. Every one of you will not spend more than what's coming in. This is principle #1. And then we go through the entire value chain. We start with the customers. So we go to the key customers ourselves, starts from the board, to BMW, to Mercedes, to Siemens. But then we go to the suppliers and we talk to the people and we try to negotiate and make it happen that the company works profitable again. This is the daily job. And this is what my team is doing, the 150 buffaloes worldwide. So who is my direct team? And I'm really proud about my Management Board for we work now, you see, since many years, me as a Founder of course, the longest. But also someone like Lennart Schley, Lennart is with me since 2011. And Lennart was running companies as a CEO, then he was a sector head, and he is now in charge for our portfolio companies, for the development of our operational portfolio companies. Then we have Mark Friedrich also since 2012 in the company, an auditor, and he is our CFO, who did a fantastic job to grow this business now to EUR 5 billion. And Johannes Laumann, super aggressive M&A guy, since 2016 in the company. Also, he started as an operational manager. I was always called from my German bosses, when I worked for Escada and L'Oreal, I was this German terrier. So you can send Robin, and Robin comes with money back from the subsidiaries. And you Johannes was always called the German bulldozer. So you will hear him later on. But this is our mentality. We are the operational guys. And you, as a shareholder, and we, as a management board, we are completely aligned. Why do I say this for? I'm a 25% shareholder. And in my life, I will not sell my share anymore. So this is -- very clear. I've no intention to exit my share. In the contrary, I just signed a 5-year contract and my intention is to increase my share. And the rest of the management team has another 11%. So we, as the management board, we are completely aligned with bondholders and with investors when it comes to growth strategy and when it comes to the turnaround. Here, you can see the global footprint. This is only in the head offices. This doesn't represent where we're operationally active. We are also active in Africa and so on. But these are only the head offices. What is the head office? A head office is an office space, and in this office space, you have your M&A advisers. Your own M&A team, they are sourcing and calling up the big corporates, and they try to get a lot of potentials for us that we can grow the business and bring more turnover to the company. And you see that we opened up now in India. I'm very happy that the roots of my father in Mumbai will continue. But we also opened up in the U.S. and China, which is quite important for our global footprint. So who are our sellers? And as already mentioned, we bought a lot of companies from the state. You see for example, the city of Helsinki. You'll see the Dutch Post. You'll see the Deutsche Bank. So these are corporates. When they -- before they sell you a company, they check everything that, are we the guys who only talk or are we the guys who deliver on our promises? And as we are public, everything can be read. You can see in the Internet, whether we are successful or not in the turnaround. And we are very transparent, and this is super important for us, for otherwise, we were not able to acquire from risk that have been a big corporate, a company Buderus that we just did this week. So this is the first sector, is a state-owned company. Second sector, the big European corporates or worldwide corporates, global corporates. And here, you can see a Magna, you can see Siemens. And also for them, it is of course important that they find the partner they can rely on, that we are not the gangsters taking away money, but we want to invest into these companies and make the company strong again. Our only intention is to make these companies profitable again. And finally, we buy also from private equity, but only if it's really dedicated and fitting to our growth story. In total, we did 16 transactions last year. Today -- I have to pay attention that I count correctly, but I think we have bought now 14, Johannes, is that right? And we want to grow the business to EUR 10 billion as communicated. So looking on our portfolio. And as already mentioned, auto is really tough these days. And the key reason is that many European OEMs are not able to sell the same volumes from electric vehicle that they sold 5 years ago. When electric started and they only sold combustion. And here in Frankfurt, our office in Frankfurt is next to the BYD store. And I looked at the prices. Of course, this is super competitive. And if I'm in Shanghai and I'm sitting in a BYD, and I asked the taxi driver, how much is the cost of this taxi? And as the puppet talking to me and everything looks like an S-class. I knew it will be super tough for the European BMWs to sell our -- and this was the biggest market or a very big market to sell to China. And this is a key problem of European OEMs when it comes to e-mobility. We have not the right product for the right price today. But nevertheless, I wanted to start with an automotive company. And it is a company that we acquired from Cooper Standard. Cooper Standard sold us their sealing business, sealing business for passenger cars. And we wanted to acquire the European business, like EUR 150 million, loss-making. We got a dowry. But we didn't want to buy the Indian business. For in India, it was only EUR 40 million and EUR 4 million of losses. So we tried to negotiate in the transaction not to take over India. And then we had to buy India for this was the deal, right? Our seller wanted to have a clean cut to give it -- to take all of these SFC out of their business. And then COVID came. And we only are successful if we send our own troops, our own team into the subsidiaries. So after COVID, we send, Nimit, an Indian guy, to these subsidiaries. He was accompanied by 10 other individuals, and they turned around the company. And today, we talk about a EUR 70 million company, very profitable in India. And I went to our key customers, Tata, Maruti, Suzuki, Volkswagen, I went to them and asked, what have we changed? And then they said, well, you had unions and works council fighting each other in the different Indian plants. And what Nimit and his team did, they were able to calm down the situation to bring in new works contracts for all the workers to reduce one plant, build up a new one. And today, we are on exclusivity for all Tata Motors when it comes to sealing products. So super nice turnaround case, super profitable business, India, where the market is growing. That's why it's so important for us to be global. For if we are only dependent on European OEMs and if you don't see that the other markets are strong, this would be tough for us. But as I mentioned, we want to be risk averse. We want to have early cycle business, late-cycle business, non-cycle business and cyclical business. I think this is a good mixture out of this EUR 6 billion. One other company that I would like to mention here is NEM. We acquired from Siemens Energy in EPC and they are producing power plants. And there was a big dependency in the beginning from Siemens. And we were able to make this company stand-alone profitable today to increase the part of services and to integrate Balcke-Dürr into the business. And today, the company does EUR 180 million with a quite strong profitability. And the last company I would like to mention is Terranor. This is a road construction company, repair and maintenance of highways in the Nordics. And we acquired with our Nordics team with Carl Kistenmacher. We acquired a small business in Sweden, not small, but only EUR 100 million. Today, the company does EUR 300 million. And how come? So organically, they won a lot of tenders for this process, but the company was very much cash losing when we acquired. And what David and his team did, they changed all the contracts with each single supplier. They changed the contract on the buy side. But also on the sell side, and these are state contracts, so quite difficult to change. And then we did some add-on acquisitions, company will have more than EUR 20 million profit this year with EUR 280 million. There will be three other companies, and I'm very happy that today three of our buffaloes will present to you companies, and I'm looking forward for their presentation later on. We have decided ourselves. This didn't come from external. This was a board decision. After 10 years, we have -- Mutares was in 2018. I invited my team to a so-called offsite where you gather around. And then I asked, what do we want? And at that time, the company had 3 years in a row EUR 1 billion in sales and EUR 20 million net profit. And I had the vision, I wanted to have a company which will have EUR 5 billion in sales and EUR 100 million net profit. Our profit, consulting income, dividend, exit proceeds. And then we said, okay, what can we do? Well, let's open up offices. We opened up Spain, I'm happy that Santi is today here. We opened up many other offices, 12 offices all over Europe. We opened up now India, the U.S. and China. And what we achieved, not until 2028, until 2023, we are a EUR 5 billion company with EUR 100 million net profit. That's what we achieved. And our guidance which -- whether there's a short attack or not, will not change, it's EUR 10 billion in sales and EUR 200 million net profit until 2028. So we were asked about our cash flow for -- you can show here maybe figures, which can be fake. It's only P&L and paper is patient. So what is about your cash flow? Why is your cash flow looking negative? And that's why I wanted to present today also for the bondholders and for you as investors, our cash flow plan from the year -- next year onwards. This will be our cash flow plan for every year. For we have invested now EUR 600 million into the portfolio, and we have EUR 4.4 billion of assets in this portfolio. We want to have at least EUR 200 million exit proceeds. And we want to have a consulting dividends at least EUR 125 million. We have holding cost and holding cost is including all interest for our bonds and all external financing of EUR 120 million. This pays all the offices, all the people. These are our stable holding cost. And we want to invest not more than EUR 50 million per year for all the transactions to do. And by this, we want to generate EUR 155 million cash flow every year. This is our model, what we will execute from next year onwards. We know that there were difficult times where we had to inject, but we also wanted to inject. We wanted to buy today a Metalltechnik. We wanted to buy Buderus. This is why for we believe in the turnaround and on the exit proceeds later on. And this slide you know already, but I wanted to show how it works. So we have these different life cycles. This is a time of acquisition where we want to spend the EUR 50 million. Then we sent our team in, our consulting team and then we want realignment and optimization, we want to generate EUR 125 million on a yearly basis cash. This is my consulting team. These are the dividends to be paid out. And you see here that -- we have -- we expect that we have exit proceeds and harvesting of EUR 200 million on a yearly basis. And this means with the holding cost, that we have EUR 155 million free cash flow operationally per year. And what does this mean? This means that we are, as a management team, very convinced that we are able to pay out an increasing dividend, that we are able to pay out -- and we changed already from a base dividend of EUR 1 to minimum dividend of EUR 2, that we are, of course, able to pay out all interests that are -- that we have to go and we are able to repay our bonds. And this was my introductory speech. Thanks for your audience, and we have a coffee break now. Thank you. [Break]

So ladies and gentlemen, let's continue with a part of the turnaround approach of Mutares. So as Robin was mentioning earlier, we are -- and we are and perceive ourselves very much of operational guys. And I would like to walk you through the next 30 minutes of what that actually means, what we are doing on a day-to-day basis as soon as we enter a company, try to be as least technical as possible. But in the end, there also is a Q&A session in case of questions. So it would be good if the slides moved. Okay. Here we go. Sorry. So you already know our portfolio. It is made up of automotive, goods and services, retail and food, engineering technology. So when we call ourselves the operational guys, we mean we create value through operational improvements. So statistics that I did some research for from other private equity companies who follow up on a very operational approach, say that the operational value creation has the biggest bucket basically of 30% to 50% in terms of overall value creation; directly followed by the deal team, which in the end, negotiate the dowry potential upsides, avoidance of downsides during the deal, and then in the end, actually want 10% to 30% of market influence that then impact the value creation. So this also clearly says that from an operational point of view, our approach is the right one. And what you see in the middle is that we basically deploy specialized operational work streams in order to generate value across the overall life cycle. And how do we do that? That is the overview. We have 25 chief restructuring officers or operational directors, a very senior team, very experienced, coming from various industries supported by roughly 150 consultants based on the various work streams across 9 practices. So these 9 practices are made up of the chief restructuring officer practice, transformation management office, finance and some more. So the ones I just named, we perceive as the key drivers during the restructuring phase. So the CRO is basically our guy. He's in the driver seat. He's sitting in the board of the company. He's responsible for the company and he is running primarily our team. In the absence of a CEO, he has a dual track. But usually, we have a CEO and primarily say the CRO is doing the restructuring and should not get biased from the day-to-day business. He is running our team. He is focusing on the restructuring, full stop. So we have these teams, these practices across our 4 segments and depending on the problems we actually see at the acquisitions, we deploy these consultants to the project that we just acquired. We call them consultants, but we run them and we also incentivize them basically based on the impact they have at the portfolio company. So they don't draw nice PowerPoint slides. Most likely in the majority of the companies, this has been done many years before. They execute, right? So they do a quick analysis, and the most that we get is a crazy PowerPoint but a good spreadsheet. This is how we run the companies with our consultants. And we gave you a snapshot of -- from which companies we basically recruit. And this is a good mix of really top management consultancies based on various work streams or practices, they have been working there, but combined with good industrial experience. Give you an example why this is important. Because, for example, a procurement project is different in how you run it if you have an automotive background compared to consultant. He basically can do the analysis, but the execution needs to come from someone who is willing to go into the fight with the suppliers fighting about payment terms, discounts, volume, claims, whatsoever. So that's basically why we have a good mix of consultants backgrounds versus industrial background. Robin was mentioning earlier the life cycles that we have. Again, you see it here. And I -- very, in more detail on the following slides, I want to point out the two cycles, realignment and optimization, because these are the two cycles in which our CRO is primarily running the show. In most of the cases, they differentiate from each other that the first cycle, the realignment, we have an unstable, cash-bleeding unprofitable situation. That's the main target, the main job of the CRO, to stop the cash bleeding and then move on during the optimization phase to basically only focus on the P&L because the cash bleeding has already been stopped. So the focus in the realignment is really cash and immediate turnaround activities. And in the optimization phase, it's more the EBITDA and the growth of the company. I'll get back to that later in a minute in more detail. So the realignment, what I was already saying, cash, stop the bleeding, primary focus less roughly from day 1 to at most 100 days, so 6 months that we basically planned for that. During that time, we should have initiated the most efficient cost -- most efficient cash-saving measures, stopped the bleeding and already came up with a strategic vision for the company, a strategic plan that we want to lay out then during the optimization phase. But the most important topics in these phases is to set up a transformation team that is working close by the Mutares team. Because you also need to imagine companies that we acquire have been loss-making for years, right? So the very, very good people already left years ago. The ones left with the company are not motivated. They basically say, oh, there's just another shareholder just pumping in some money and closing the gaps. We have to change the paradigm. We have to motivate them again. We have to incentivize them to pursue our journey with us because we can't do it on our own. We always say as soon as we enter the company, we are not smarter in terms of the industry experience. You guys are. You have been working with the company for so many years. But we know how to run a good company, how to apply basic economic fundamentals again that you have lost track of. So it does not make any sense to buy in tenders, to buy in projects with negative margins of 20% because you only think, well, I just want to have some revenues. We look at the margins. Revenues and growth in that situation is of secondary nature. At the same time, as I showed on the previous slide, the carve-out topics in terms of IT become more and more important. And that's also a reason why, combined with CRO, TMO and finance, our biggest practice is actually IT. It becomes more and more important to our sellers that we know how to carve out within 6 months a complex SAP system out of their server. They don't want to have us on their servers for 12 months whatsoever. They basically push us for very short TSA agreements in order to keep us as short as possible on their servers and then move on. So one option is basically doing, for example, a copy paste of the overall SAP system. But as soon as we cannot do that any longer and have to implement a new ERP system, things get tricky, things get very time-consuming, and that's important -- that's the reason why we have own people on our payroll in terms of IT. What does it actually mean in terms of strategic vision and showing operational value? This is now kind of a technical thing, but shows how -- what kind of business plan methodology we apply. We always take the actuals -- the financial actuals of the company as of closing, right, either based on the management accounts or based on their financial laws. We take this one. And then we adjust it for the good effects and for the bad effects in order to derive what we call to a so-called run rate. And the run rate for us is something like the financial KPI that we would achieve if we did not do anything. If we just sit at the sideline and look at how the company would evolve and perform. That, for us, is the run rate. Usually, it's highly negative, just wanted -- for graphic purposes, I don't want to show that here. That is the baseline for us, the run rate. And as soon as we have that, we add from the work streams, from the practices that we apply to the project, we add the impacts on top of that. So we only think in terms of EBITDA impact and in terms of cash impact for a period at the beginning of no longer than 2 years. That is how we think in terms of every decision. How does that contribute to the bottom line of the company? How does that add value to the overall Mutares journey? And this is how we build our business plans on a yearly basis. So even in year 2, we basically sit back again, what did we do good? What did we do bad? And then we adjust again the result and find new measures, new activities. And that is on a consecutive basis how we run from day 1 across all the life cycles of our portfolio companies. So that happens during the realignment phase. And now let's move on to the optimization phase, which will take longer, which basically is from 6 months, possibly to 2 to 3 years. We try, of course, to shorten this as much as possible because we also don't want to have our CRO, the full-time deployed at that company. So our target is to have our CRO with the company for no longer than 18 months. And then this guy should move on to the next project based on his or her industry experience, based on also language as we grow, becomes more and more important. We cannot always send a German-speaking guy to Finland or to Sweden. We need to have someone locally there. So that means -- so if we don't want to add too many people on our payroll, we want to have short periods of CRO engagements within the companies. And within that period, we basically focus on execution of the business plan. So I just showed you the business plan methodology and now it comes into execution. So implement a continuous improvement culture, further reduce variable costs or execute the plan that we came up with earlier and set up a clear vision for a commercial plan for the next 3 years. And that is the basis also when we engage in discussions with financial partners, we need to convince them of our 3-year plan to show them what we already achieved within the first 6 months or 12 months and what we are planning to do ahead. So that is the key difference between, let's say, realignment and optimization, first, the pure cash focus, then in the second stage is the pure EBITDA and growth focus. So these are the key levers basically that we don't lose track during this 2- to 3-year journey. So I already was mentioning the CRO who is supposed to be on site on a daily basis during his engagement, interacting with management, interacting with the people, showing faith, showing the employees that they are not alone on their journey. So they need to be on site. So the CRO topic I was already mentioning. So we already added the layer of financial control. That basically means also from Munich headquarters we check on a monthly basis the financials and review them, look whether they adhere to the budget or not and check the cash forecast for plausible reasons, et cetera, et cetera. That's already in place. Additionally, we have so-called operational audit. That means if a consultant who was basically executing a project in procurement or supply chain, leaves the project, is supposed to come back 12 months in order to check whether everything is still aligned or whether possibly the culture fell back into old patterns because they didn't felt supervised enough any longer or controlled any longer. So we have all these levers already in place. And we will add now a fourth lever because we grow heavily, we get into regions where culture matters. So we want to add an additional level of supervision, control and coaching. That's why we want to have operational partners which, at the same time, the CRO in a very late stage, so where they don't need to be involved on a very daily basis; and at the same time, coach, supervise 3 to 4 other portfolio companies. And that means that they also coach the CROs, coach the management team, share know-how because it makes sense to have, for example, an operating partner with a very clear know-how and track record within the construction industry across our various segments. So we actually want to add this as an additional lever to be closer to be close again to the companies even in the later life cycles and don't lose track. So as a summary, what we perceive now during this journey as the key principles or the key success factors for our successful transformation, coming back to the points I mentioned on my very first slide of the 30% to 50% value contribution of operational activities and also the roughly 30% to 40% transactional contribution. So we -- a good deal is also made during the transaction. For us, that means preferably a dowry deal, so basically a negative purchase price or a low purchase price as soon as we get into add-ons, carve out from big corporates, under-managed assets from them, good balance sheet with P&L. So that is where we most feel comfortable with. Then the second point is the CRO engagement. We want to be quick. And sometimes between signing and closing, we have months that passed. And that's important that our CRO is already trying to engage with the blessing of the shareholder with a local management team and learn about the dynamics of the business and learn about the certain technicalities and also of the pitfalls that we might not have seen during the due diligence because we didn't have full access to the complete company. And the last point is it will be a very much contributing success factor that the operational partners will company along the overall life cycle even after the optimization phase. So third key success factor is the rapid implementation of our turnaround activities we also leave room for error. We also make mistakes, but we don't do the same mistakes again. Because these mistakes happen under pressure and we want to be quick. We make quick decisions, sometimes at cost also of a failure, but we have a very good ratio in terms of this. But our track record also shows that we would always sacrifice the last euro that we save -- not sacrifice the last euro that we save at cost of speed. We need to be quick. We need to be quick because in the first 6 months, we have the momentum on our side, and we can implement these rapid changes. And the last point -- one other point is that our team must not get distracted from the day-to-day business. They need to be focused on the turnaround and have good management, good teams on site that basically do the day-to-day business. So we don't want to do any buddy leasing whatsoever. So our team focuses on the turnaround, and the local team focuses on the day-to-day business. And together, they form a buddy team and work closely together. And the last point is a very important one. In a situation of a company being in cash distress, you might be hesitant in spending money on talent because, at the one hand side, you look for cost reductions also with regard to the overall head count. But you need to be willed to spend money in talent, which often has left the company years ago. And that often comes with a cost. So this is also something that we need to do at the very beginning, set the team. We will not be successful as soon as we get out of the company if we not have changed the paradigm of the local management and if we not have added good additional management on top of it, which do have a clear industrial background and a clear track record and also help us to contribute to the overall operational value creation. And you will see now two -- three examples of where this was executed very successfully. The first ones are still within our portfolio. The third one is then later on, Steyr Motors, which we are currently IPO-ing. And these two examples that we picked are different in the execution of the turnaround plan, because along the road, not everything can be planned out and you will face hiccups. And these are basically two good examples with Palmia, where we very much had a very straight and lean turnaround approach, where we turned the company around within even a year and then we were able to hire very good management with this current CEO, Mika Martola, who is then growing the company. And at the other point -- at the other hand, we had keeeper, which is now with us for 3 years. And shortly after we acquired the company, we had things like COVID, we had the Ukraine war with a peaking raw material prices. These are exogenous factors which we cannot factor into our turnaround plan right from the start, but where we need to react then afterwards. And that's what we successfully did also at keeeper and really have a very profitable company basically then set to grow to the next stage. And I'd like now to hand over to the Palmia CEO, Mika Martola, in order to give you a very good overview of what we did in detail at the company and how it's currently performing. Mika, over to you.

Thank you. So why am I here? I'm here because together with my Mutares team, we turned around a public company with a history of red figures into black figures, into a company with black figures in, let's say, less than 2 years, a bit more than 1 year. That's why I'm here. Why me? I've been working with the service industry in Nordics for all my life, which is actually quite many decades at the moment. And I've been working with companies that had bad figures, helping them to sort of increase the margin and then in sales, growing companies. So quite a big history, also working with private equities listed companies and family farms. Those are probably the reasons. And why did I want to join Mutares? Let's say, 4 months after Mutares had bought, I met the team for the first time. And I was impressed, of course, by the plan. Very impressive, sort of deep understanding of the business logics within these businesses. But I would say most what I was sort of impressed by was that when we met in the lobby actually of the company, the team called the receptionist and the lady in the cafeteria by their first names. For me, that meant sort of very big commitment and very good understanding. And I know from my experience that, that also means that you get good commitment from the team by things like this. So that's why I'm here. Good. Regarding the figures, this is what we look like. Simultaneously, as we increase the EBIT to a positive figure, we also got a growth that is much higher actually than the average in the market. So these two things were done simultaneously. I would say that one, of course, key success factors would be that you need to understand quite fastly what this business is all about. From my experience, I would say that the team, as they were on site from day 1, and meaning every day since then with the people, they understood the business and they understood the people. That was one key element. Of course, this enabled these people to gain -- make a very good plan of sort of different elements, but they did parallel plans for growth and cost efficiency things, two things. Then as part of being on site, that enabled them to have a very open discussion and communication with the team, which brings us a very good buy-in from the personnel. So you get the commitment from personnel that this has to be done and it needs to be -- sort of everybody needs to participate. That's good. And then very -- sort of very, very good discipline in following all the sort of incentives that were planned, day in, day out for every day. Not letting any one -- not any of the initiatives fall off or they were letting go. Those are important. And then with this -- with reminding you with the history, you need to understand and you need to get sort of the -- sort of a cultural change within the people, of course, appreciating the good history that the company had. I mean as a public company, there was a very good commitment of doing what you promised. So that you had to keep, but then you need to make some black figures on this one. Good. The previous owner, as mentioned here, was Helsinki City, a municipal company. The municipals in -- at least in the Nordics tend to have a very sort of -- let's say, they're politically a bit sensitive. So they tend to do what they promise, day in, day out. So very high customer quality and also a very good brand as an employer. So you had good people but no focus on the results. And of course, that partially was assisted by the fact that you had an endless cash pool with no interest rate at your disposal, one thing. Then -- and of course, that as bureaucracy tends to grow by itself meant that you had quite a heavy sort of overhead organization supporting the actual business. And then let's say, lack of purchase or control on the purchase part meant that we were buying quite wildly things that are not utilizing our sort of big volumes. That's the history. Now maybe a bit of the company. I have 2,200 colleagues in Finland working within these services. And now I would like to show you a short video so that you understand what we actually do on a daily basis. [Presentation]

Thank you. So that's what me and my colleagues do. We safeguard every subway trip in the capital region in Finland. I have more than 200 colleagues doing that every day, every night. That's what we do. We feed more than 40,000 children every day, the children from age 1 year to 16 years, the school lunches. That's what we do. We take care of more than 1,000 patients every day in hospitals and elderly cares, all their meals, all these sort of cleanliness of their rooms, all the maintenance things that janitorial guys do. And we're only a bit more than 2,000. I think that's quite impressive. Good. So then back to the facts, so to speak. The plan, as I said, done very swiftly by the team, included more than 700 different small items. Those combined into, let's say, key initiatives in this case. We talked about sales. And as I said, we made a growth simultaneously. So we centralized the sales. We had one group focusing purely on growth, which made it more easy for the rest of the group focusing on margin. That, I think, was the key issue why we also grew during this transition. That was good. And sales, as you probably all know, it's a discipline. It's not an art, as some sales guy might say to you. It's actually a discipline. You need a pipeline, you need a systematic approach. You need to choose what you sell and what you don't sell. I think this was a very -- sort of very good, good example when we chose which segments we are good at. We looked at our history and noticed that we're good with publics, we're good with quality. And then we picked segments that these two things are important. That's one. And of course, looking at the private market where we haven't been yet and now we are actually quite strongly in, we also picked the sort of ones in the segment -- in the private segments that actually appreciate high quality before price, type hotels, shopping malls, things like this where the quality actually matters. Good. And then we also -- as we had a history of having quite a lot of services in the business, we took some out and picked the core ones. We had -- we used to have electricians. We used to have event catering. We used to have things like this. We weren't very strong at it. They were not very good businesses but we had satisfied some customer needs so we picked them up. That gives us a good chance to sort of focus in both sales and in operations. Those are sort of the key issues on this one. Then in operations. As I said, we weren't very good at purchasing. So we retendered many -- the biggest services -- the biggest sort of purchasing items that we did. For example, I buy groceries for more than EUR 20 million every year. That's a big sum, makes me a quite bigger buyer in the Finnish market, as an example. And also when we look at the operation, of course, it's easier to focus on one single service such as cleaning, such as lunch restaurants. Taking out the sort of event catering from that team made them to focus a bit more. Very good change. And then at simultaneous, we happen to have -- I mean I never made it to the corner office that my predecessor had. We reduced our office space by 2/3 or 1/3. So we saved more than EUR 600,000 a year by just doing this. And I'm not that much at the office, so it would be wise and very easily done. And then HR, we also had quite split functions within the business units. Security had its own recruiting system, janitorial services. So now we centralized it all. Meant two things, of course, we got more efficient in the recruiting, but we also had more focus in the actual business when we could take out these sort of things. And then we also had the luxury -- or let's say, the luxury of having a public union agreement, which is a bit -- I mean it's not as good as the private ones when it comes to a specific service or market. That's work ongoing still. But there are lots of possibilities. But then from my experience, I would say one of the biggest strengths I felt within this team I have the liberty to work, still with, they're on my board now was that, of course, we had the plan, a good understanding of the business, but I would say that there were two key things. First of all, the team was -- had a good cultural mix for our company. We had 2 guys from Finland and 1 from Germany, 1 from Sweden -- 2 from Germany, actually, sorry. So the team was a mix, but we had the understanding of the Finnish culture also embedded. And there is -- I mean we have some limitation when it comes to service industry with maybe the linguistical skill. So the communication was good. And the other thing I appreciated highly, as I mentioned in the beginning, was that the guys were actually on site. They were meeting the people, meeting the blue collars every day on-site. For example, one of my -- one of the Mutares team guys, he came in, I think, every Wednesday at 5:00 a.m., which is a bit early to be office hours, just to meet one of my sub stewards who was always starting at 4:00 a.m. They had a good conversation, and they basically -- I mean there was a bond. And you had a buy-in -- you had a tremendous buy-in from this lady, and she was very committed to this as an example. The other example I had was one of the team got their firstborn actually. And believe it or not, the whole company was proud and happy about that. So you could say that they actually were part of the team and the team, those two -- let's say, more than 2,000 people were very much aboard because there were persons in this. Good. Then coming back to, let's say, the hardest of the culture. I said a long, long history of not looking at money at all. That's something that you probably get accustomed to. So we have been -- let's say, we have been working on that everybody knows the figures and everybody wants to know the figures. We're very open when it comes to our results. Every month, every day, we have an info. Every time when I meet someone, I ask, how is your finances? And then we talk about the small things. So we keep -- let's say, keeping the eye on the ball and the simple ball. Only finance at this point in time. So that's what we're doing. Then as I said, I mean it's good that we could split growth to one division and then have the rest focusing on margin. It's a very sort of simplifies the things and speeds some things a lot. You don't have two issues to carry. You just need to focus on the margin or the growth. And then, of course, this means that as the service business has -- I mean all businesses have their different logic. The service business is one thing, especially in these services I do is that I have sort of first-level supervisors that lead the cleaners, that lead the guards. They need to make financial decisions every day. You have got somebody sick, you need to take in a temp. Can you fix it by yourself? Something breaks, screwdriver breaks down. Do you need a new one immediately? How do you fix it? Small things combining to most of the financial decisions every day. And I got 150 of those. So we needed to also support these guys to understand their figures by having a very good, strong controlling team, but specifically good with communicating with the first-level supervisors. So that has been helping us a lot and leading us to even more and more profitable results. And then also sort of having a bit, I would say, a bit exaggerating the importance of something. For example, I approved all of the temp workers for the cleaning business for half a year. My CFO, Miia, as you saw, is still approving every headset, every pencil, everything that's nonrelated business by herself. She's the CFO of a quite big company. But it gives the message to the people that these things are actually important. And I say, as purchasing, we have a very simple system that if you buy something from somebody who's not on our list, we don't actually pay the invoice. Then you need to basically take the stuff back as a -- sorry, a bit exaggerating, but still a very simple thing. And then also, as I said, we focus on what we're good at. We don't -- we're not inventing new services at the moment. We're doing what we're good at, and that's what you can get from us. When you're a customer, I'll say you'll have a good service, but that's it. If you want an electrician, I'm the wrong guy. You have the janitorial services day in, day out, but the electrician is not in my book. Or event catering, I can fix you a small event, but I can't fix you this. Then we need a network. If I run -- if I would run this canteen or bar, I would probably advise you to use somebody else when it comes to this. I need to focus on these businesses. I'd say we had a very good -- I mean our history compared to our competitors is that our blue collars are very highly trained. We had a very efficient training program model for our RDs. And that, of course, means that my people, my guys at the metro, cleaning the hospitals, making the kindergarten food, they have much better chances of doing a very good job when they're trained, which makes them proud, of course, and it gives them a possibility. Good. So those were basically my key messages. First of all, speed, then getting the people aboard by giving a personal commitment being on site. Then also, I mean keeping -- when you make a plan, you need to stick to it. You have continuancy, you need to have the discipline. It's a good message to the people and it makes it much more simple. You need to have the sort of implementation power all the way. And then the culture, you need to on a daily basis change the culture, you need to remind it and you need to have the focus on that specific system. Kiitos is the Finnish word for thank you. Now if you want some questions, I'm happy to answer them.

Sir?

So having turned around the company -- my name is [ Rudy Golozana ]. Having turned around the company, what are your plans to exit? Where does it fit in? Is it more a direct access to a competitor? Or would you like to give it back to the company you bought it from? Or would you like to load it on the market? Thanks.

Maybe you can take this one.

So basically, what we are currently looking at, we have now a profitable company, which we can grow organically, right? So that's what we're currently doing. As you have seen, it was carved or a buyout from a municipality from Helsinki. So we currently see that trend that other municipalities, due to legislation, need to roll off their service companies. So for us, it's a good chance if we are early enough in contact with them to have add-ons in particular regions so that we have another -- in the Southern area that we have basically similar businesses that we could add on to the current Palmia platform. So that's the first thing. Second thing is, of course, there are big competitors currently in the market. And facility management is you might not believe it, but it's a well-established and a very interesting business for big corporates as soon as you adhere to the processes and if you stick to it. So basically the option could be then to exit to a strategic partner or which could also be an option as soon as we grow in size and the first option we are able to execute with additional add-ons, also to do an IPO in Finland. So we don't have a clear guideline yet in terms of timing. It will very much depend on the number of add-ons that we are able to close. And then we have basically the two options; to exit to a strategic investor, or if we're big enough, also to do an IPO. So then, thank you, Mika.

Thank you.

Now you have seen a service company with 2,000 employees, a very nitty gritty business, cleaning, catering, very much depending on union agreements, very much depending on processes that you need to adhere to. And now we come to a different example of our companies with keeeper, which is a production company where we, as Mutares, originated from. Because we always had -- our DNA was always you don't only have business guys, but also a lot of engineers or physicists which know and understand the production processes, and by that basically can execute also the change. And there was one of the earlier acquisitions mid of 2019 where the path actually took a little longer and get to the full turnaround. So we are very happy now that with keeeper, we also found new management which takes on basically a well-established business and is able to further grow it then in the next couple of years. So I hand over to Martin Bieri.

Yes. A warm welcome to everyone. It's a great pleasure to be here, and thank you for your time. My name is Martin Bieri. I'm the Group CEO of the keeeper Group. And you might ask yourself, who's keeeper and what are they doing? You will learn more about it in a minute. Quickly about my background. I worked my entire life with consumer goods in various areas, so for huge retailers, for instance, like Walmart in the U.S., like Metro Group or Tangeman Group in Europe. I worked for agencies like TCC in London, where the opportunity to work closely together with big entities, famous brands from corporate, lifestyle, entertainment and sports. And finally, I moved to the industry, worked for premium brands like Fissler and WÃœSTHOF. But back to keeeper. So keeeper is one of the leading brands in Europe when it comes to storage solutions. Let me show you. So all in all, we are offering four different categories. First is home. And because we are doing consumer goods, for me, it's easy to show you real products. So home, yes, means products to make your home nice and cozy. Second category is kitchen. We want to improve your cooking experience. Third category is storage. We want to organize your belongings, and it's really easy, not just for me. And that's it, just as one example. And last but not least, also kids. Again, just one example out of 700 SKUs. So sorry, I'm not using this any longer. But anyhow, so here we are partnering with Disney and other very famous franchises. Thank you. Yes. Some more key facts about us. So all in all, every year, we are selling roughly 35 million products. This is huge. So we are existing for 65 years, and 95% of the products are produced, are made in our own factory, which is in Bydgoszcz in Poland. This is more or less in between Warsaw and Gdansk. Already, 20% of our whole assortment is out of recycled material, so-called regranulate. We have 600 employees and we are distributed in 55 countries. So you might have asked yourself, why do they spell the name with 4 Es. There's a reason behind. Let me show you. So the first E stands for ecological, the second one stands for efficient, the third one for essential. And because we want to become a loved brand, the consumer brand, the last one stands for enjoy living. But let us show you a short video. [Presentation]

Okay. So of course, there was a restructuring process. Mutares took over the company, acquired the company when it belonged to an industrial holding with a very unsuccessful strategy. So the key actions which have been taken were, for instance, that we moved the whole production logistics from Germany to Poland. A social plan, which was very important for us to also make sure during the movement and during this restructuring process, we still keep important employees, and we have, at the end of the day, a good development of the company. Price increases, we were lucky, we were happy. We were able to increase our prices by 15% in average, which helped us of course to improve the margin. And also important for us, to optimize our customer bases as well as our assortment, also slow movers or, for instance, some of our clients which weren't really profitable from our perspective. And last but not least, also important for us when it comes to the production, we introduced, we implemented some automotive standards. This was our factory in Germany, was, so this is no longer the case. And now you will see after this slide also the factory which we currently have with our own logistics center, what Lennart already mentioned before. So it took slightly longer due to COVID, due to raw material shortages and the war, for instance. But finally, we were able to achieve the turnaround. And this is our new factory. So on the left-hand side, we have 18 truck terminals. We have a big warehouse, close to 18,000 square meters with 25,000 pallets inside. We have our own mold shop, also 55 injection mold machines right now, more space for additional machines. PP silos, this is important, the granulate. This is our main raw material. And additional warehouse. And last but not least, really important because, as Lennart said, we want to grow, also still space to expand the factory. Yes. Now we are coming to the strategy. How do we want to grow? There are five really important pillars for us, and we wanted to make the strategy quite easy, quite easy to remember internally and externally. So first of all, it's about internationalization. Due to the fact that we are very automized, we are very competitive even against the Asian, for instance, the Chinese. So therefore, we want to enter into new markets, into overseas markets. So besides the 55 countries where we are distributed already, we also want to enter into North America and Pacific. I'll show you later. So please keep in mind, the first letter, the I. Second one is about digitalization. I think it goes without saying that it's important to digitalize your processes. So just to mention some examples. So there will be a PIM, means the product information management system, which is really key for us when it comes to e-commerce, our own one as well as the one from our omnichannel retailers. Then we will implement a customer relationship management system and many more. Next one is emotionalization. So we want to become a loved brand. I will show you some examples. And we want to tell stories and we want to have a much more lifestyle approach compared to the past. Next one is agility. This is always important. You always need to know what's going on, what are the latest trends when it comes to consumer goods and what is your competitor -- what are your competitors doing? And the last one is longevity. Of course, we want to make sure there's a long-term successful survival. So if you put together those letters, it's quite easy. It's the IDEAL strategy. And this is what we are doing. So to show you some quick examples, we started a lot of key initiatives beginning of this year. Many of them are already executed, some are still work in progress. I just want to share four of them with you. So besides all the products which we are producing right now in our own factory, we also started to develop innovative products outside our factory, which are out of other materials, also out of sustainable materials, for instance, what I show you here, the next one. This is out of recycled plastic bottles, the fabric, which you see on the right-hand side. All products are foldable. Those are shopping helpers. They really help you to organize all your shoppings, easy to wash. So this will be launched pretty soon, the whole lineup, different colors. There are insulation bags, for instance, which keep your belongings or your goods fresh, cold or warm for at least 5 hours. And of course, it's really important that it fits to the core of our brand. This is just one example of many new innovations. Another important one, I talked about emotionalization. So we want to become a loved brand. We did a brand refresh in September. Of course, we kept the name keeeper. We kept our little squirrel, which is called keeepy. But we changed a lot. We changed our claim, colors, the whole corporate design. So our new claim is keep what you love. And this is, I think, a very strong one. We had to change catalogs. Yes, we still have printed catalogs. And we have to change or had to change also our website, which will be available in five different languages. Next one is about our factory. So as you heard in the video, our main distribution channels are DIY furniture stores and grocery stores from 55 countries. So we want to get a closer relationship to those buyers, to those key customers. So therefore, we are currently working on a 250 square meters showroom in our factory next to the production. I show you the first renews. This will be done in January next year because we want to make sure that those buyers will visit us. We can show them our whole assortment, new concepts and so on, and then we go to the production and they will see how everything is produced. And at the end of the day, showing them our very impressive logistics center. And the last one I want to share with you today is about internationalization. So here, you see where we are currently. The colored ones are our own offices. And yes, we already signed agreements now for Mexico, for Canada and the U.S. That means North America. And the next step, and here we are in final negotiations, will be Australia and Pacific. Next year, of course, we won't stop. There are new initiatives. And besides B2B approach initiatives, there will be also some D2C or B2C initiatives. For instance, we will launch our own web shop and many other things. So this is the agenda for next year. Yes, I'm pretty sure you also want to see some financial figures. So when it comes to group sales, let's start with 2020. So in 2020, our group net sales were EUR 65.9 million with a negative EBITDA. This year, we will end up close to EUR 80 million with 9.7% EBITDA. And in 3 years, we want to hit first time the EUR 100 million with an EBITDA of 12%. This is pretty much it. And please don't forget, keep what you love. Thank you very much.