Finanzbericht - Group Economic and Business Report

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Group ECONOMIC AND BUSINESS REPORT

General economic and business conditions

Overall economic environment

According to the International Monetary Fund (IMF), the global economy recorded its weakest growth in 2019 since the global financial crisis a decade ago.¹ According to a January 2020 update of the World Economic Outlook (WEO), global economic growth was down from 3.2% to 2.9% in the year elapsed. This equals a forecast correction of -0.1 percentage points compared to the WEO of October 2019.² Increasing trade restrictions and the associated uncertainties put a damper on business activity worldwide and lent momentum to the economic slowdown, particularly in the advanced economies and in China. Moreover, the weakness of the major emerging markets impacted global economic growth. Consequently, increasing uncertainty resulted in companies postponing investments, thereby weakening demand for machinery and equipment. As a result of sluggish demand for durable goods and weaker industrial production, global trade stagnated in 2019. Central banks, including the U.S. Federal Reserve, the European Central Bank (ECB) and major emerging market central banks, reacted to the lackluster economy by lowering interest rates over the course of the year to counteract a stronger downturn. The IMF assessed the first signs of a bottoming out in the manufacturing sector and in world trade as positive, as well as encouraging news from the trade negotiations between the USA and China in addition to diminishing concerns about a "no deal Brexit".³

After several quarters of stronger-than-expected growth, the US economy slowed down, with the result that the IMF expects gross domestic product (GDP) in 2019 to be recorded 0.1 percentage points lower than its October forecast at 2.3%⁴. In 2018, US growth had still amounted to 2.9%.⁵

At 6.1%, economic growth in the People's Republic of China in 2019 remained unchanged from the October forecast and was down on the prior-year figure of 6.6%.⁶ Weaker growth was attributable to regulations to curb debt and overall demand, which was burdened by increasing trade tensions.⁷

According to the IMF's unchanged January forecast, euro zone growth slackened from 1.9% to 1.2% in the past year.⁸ This lower growth reflects a general slowdown in industrial production as a result of generally weaker foreign demand. In addition, the global impact of trade disputes and the significant slowdown in global automobile production also exerted a negative impact.⁹

In 2019, the German economy expanded for the tenth year in a row, with gross domestic product (GDP) up by 0.9%. According to the Federal Statistical Office (Destatis), however, in this longest growth phase of united Germany the economy lost momentum in the fiscal year elapsed compared to the previous year's figure of 1.5% and the average figure for the past ten years of +1.3%. Growth impulses in the year under review were generated in particular by stronger growth in consumer spending by the public sector and private households than in the two previous years. Exports also continued to develop positively with an increase of 0.9 % (adjusted for prices), although less vigorously than in 2018 at +2.1%.¹⁰

Development of relevant industries

In 2019, the German mechanical engineering sector had to hold its own in an increasingly difficult sector environment. Impacted by the weak world economy, global trade disputes as well as far-reaching structural shifts in the automotive industry, order intake and production were below the previous year's level due to customers' reluctance to invest and postponed investments. According to figures available at the time of reporting on the 10-month period of 2019, order intake in the mechanical engineering sector was down by 9% year-on-year. The German Engineering Federation (VDMA) stated the production decline for 2019 as a whole at 2%.

After a strong order backlog that was largely reduced over the course of the year, the German robotics and automation industry was no longer able to escape the economic slowdown in the mechanical and plant engineering sector. An autumn revival as in previous years did not materialize. In addition to a global economy that is losing momentum, saturation effects in important markets such as the production of smartphones burdened developments. Investment reticence was particularly impacted by uncertainties arising from the transformation of the automotive industry and the flaring up of trade disputes. With a look to 2019, according to the VDMA Robotics + Automation Association, sales are expected to decline by 5% to 14.3 billion euros.

According to the German Association of the Automotive Industry (VDA), 2019 was a challenging year for the international automotive markets. The European passenger car market achieved a nominal sales increase of 1% over the previous year's level. By contrast, demand weakened in the USA, falling below the 17 million units mark for the first time since 2014 (-1%), as well as in China, where demand was down for the second time in recent decades (-10%). In 2019, the German passenger car market achieved a 5% year-on-year increase in registrations to 3.6 million passenger cars. The last comparable market volume gain was recorded in 2009 with 3.8 million passenger cars. Domestic orders also developed positively, posting an increase of 6%, while orders from abroad were 2% below the level of the previous year.

As the German High-Tech Industry Association SPECTARIS stated, the German medical technology sector achieved another record in 2019, posting an increase of around 6% above the 32 billion euro mark. Demand was stimulated by the digitalization of the health care system, global population growth in conjunction with rising prosperity in the emerging markets and demographic change in the developed economies. As a result of the new European Medical Device Directive (MDR), German medical technology companies also benefited from stockpiling prior to the UK's planned withdrawal from the EU and from bringing forward investments in China due to trade disputes with the USA. Especially the German ophthalmic optics industry, which is important for MAX Automation, was able to record its most successful business year of the last decade. In an unbroken growth trend since 2011, the industry achieved sales gains of 5% to around 5 billion euros with gratifying growth in Europe, North America and Asia.

Up to the publication of this annual report for the year 2019, the VDMA Waste and Recycling Technology Association expected stable sales growth of around 3% compared with the previous year's figure of EUR 2.9 billion, unchanged and for the third time in succession. Domestic demand for efficient plant technology benefited from the Packaging Act that came into force at the beginning of 2019. With a look to exports, the most important pillar of German waste and recycling technology, the VDMA trade association expected a renewed, slight increase in the export ratio to 67% by comparison with the previous year.

Business development of the Group

MAX Automation has developed successfully in the 2019 transition year with the realignment to the three segments of the core business, Process Technologies, Environmental Technologies and Evolving Technologies. In its core business, the MAX Group benefited in particular from the subsidiaries' pronounced, in-depth know-how in areas of future-oriented technologies such as e-mobility, process automation and sustainability.

At the Group level (including non-core business), order intake of MAX Automation decreased by -6.8% to mEUR 379.9 (previous year: mEUR 407.6) in 2019. Core Business declined by -2.8% to mEUR 316.3 (previous year: mEUR 325.4). While Environmental Technologies reported significant growth in order intake, Process Technologies and Evolving Technologies were down year on year. As of December 31, 2019, order intake in core business decreased by -11.9% to mEUR 152.9 (previous year: mEUR 173.6) correspondingly, while remaining at a high level. At the Group level, order backlog was mEUR 199.5 (previous year: mEUR 260.3) as of December 31, 2019, and therefore was -23.4% below the previous year. Nevertheless, order development was in line with expectations with a book-to-bill-ratio of 0.89 (previous year: 1.01) since there still had been a higher comparison basis in particular for one-time projects in the Evolving Technologies segment in the previous year in particular.

In Non-Core Business of Max Automation, order intake decreased by -22.6% to mEUR 63.6 (previous year: mEUR 82.2) in 2019, which was impacted in particular by the announced closures of IWM Automation companies. Order intake in Non-Core Business declined as of 31 December 2019, with the gradual processing of ongoing projects in the companies to be closed by -46.2% to mEUR 46.6 (previous year: mEUR 86.7).

With regard to the 2019 financial year, the Managing Directors for the continuing operations, the core business, based on the portfolio at that time and the expectations for the overall economic developments as presented in the 2018 Management Report, had initially assumed consolidated revenues of more than mEUR 300 and EBITDA of more than mEUR 20 (excluding the transition effects of IFRS 16).

After the first nine months of 2019, on 22 October 2019, MAX Automation SE issued its forecast in concrete terms based on the positive business developments and the continued strong demand in its core business and raised its expectations for the full year 2019. Management forecasted higher revenues of mEUR 320 to mEUR 330 for the core business. Revenue of mEUR 400 to mEUR 420 was anticipated for the Group as a whole (including non-core business). At the same time, management raised the outlook for earnings before interest, taxes, depreciation and amortization (EBITDA) to mEUR 26 to mEUR 28. With regard to the Group as a whole, EBITDA of minus mEUR 6 to minus mEUR 10 million was assumed. Both results did not yet take into account the expected effects of the first-time application of IFRS 16 (Leases) in the amount of mEUR 3 to mEUR 4.

The comparison of forecast and actual figures shows a slight increase in actual figures of 5.1% compared to the management's increased forecast to consolidated revenues of mEUR 425.5 (previous year: mEUR 404.0). Non-core business once again significantly burdened the entire Group in the course of the year. Measures implemented for overcoming operational problem areas in Non-Core Business could largely be implemented by the end of 2019. With regard to the Group as a whole, the operating loss could be decreased with an improvement by 95.6% to a consolidated EBITDA of mEUR -0.9 (previous year: mEUR -20.3), including the initial application of IFRS 16. The IFRS 16 effect was mEUR 4.0. The improvement of EBITDA to minus mEUR 6 to minus mEUR 10 promised by management was therefore exceeded at the Group level. The backdrop for this improvement is primarily an error correction according to IAS 8 that was carried out, which had a positive EBITDA effect in 2019 in the amount of mEUR 4.6.

A particularly encouraging sign was the development of the revenue situation of all three segments of core business with sharp increases in sales. In 2019, revenues in core business were up by 21.5% to mEUR 339,3 (previous year: mEUR 279.2) and thereby stood 2.8% above the elevated forecast. In core business, earnings before interest, taxes, depreciation and amortization (EBITDA) of mEUR 36.0 were recorded in 2019 at a plus of 133.7% (previous year: mEUR 15.4), including the initial application of IFRS 16 (Leases) of mEUR 3.1. Consequently, management expectations for the operating result of the Process Technologies, Environmental Technologies and Evolving Technologies segments were slightly exceeded, which can be traced back to an error correction according to IAS 8.

In Non-Core Business, revenues in 2019 fell by -29.7% to mEUR 89.8 (previous year: mEUR 127.7). The operative earnings before interest, taxes and depreciation (EBITDA) of mEUR -36.6 (previous year: mEUR -36.0), incl. initial application of IFRS 16 (Leases) had a negative effect, in particular, due to the costs of companies intended for closure and the completion of negative projects.

In summary, MAX Automation can look back on a good year despite all short- and medium-term challenges, which is mainly due to the positive developments in the core business. In a declining market environment, the Group was able to hold its ground and close the year above the revenues and earnings forecasts made.

Significant events for the course of business

The positive business developments in the year under review were fundamentally shaped by the Group's strategic and organizational realignment. The core of the measures was the focus on the three core business areas Process Technologies, Environmental Technologies and Evolving Technologies.

The clear focus on the three core business areas contributed significantly to lifting profitability in the Group. The discontinuation of non-core business companies that were no longer profitable or no longer suited to the strategic realignment proved expedient. In this context, the closure of IWM Automation Bodensee GmbH as of 31 December 2019 as well as the decision taken in September 2019 on closing IWM Automation GmbH by no later than 30 September 2020 should be mentioned.

The completed realignment and continued strong demand in the Process Technologies, Environmental Technologies and Evolving Technologies segments resulted in an increase in earnings expectations for the core business for the year as a whole at the beginning of the fourth quarter of 2019. The positive development was also bolstered by two major orders that the MAX Group companies received in the last quarter of 2019. Our company bdtronic, for example, is manufacturing systems for the production of electric motors for the premium car manufacturer Audi. The subsidiary MA micro automation GmbH is producing assembly systems for medical optical systems for a customer active in the medical technology sector.

Group accounting and scope of consolidation

MAX Automation SE has prepared the consolidated financial statements for the 2019 fiscal year in accordance with the provisions of the International Financial Reporting Standards (IFRS). The Company is thereby exempt from preparing consolidated financial statements in accordance with the provisions of the German Commercial Code (HGB). The figures for the previous year were also calculated in accordance with IFRS.

The Supervisory Board of MAX Automation SE decided on 25 September 2018 that the Group will withdraw from the construction of special machines and assembly systems for automotive customers in the Mobility Automation division. In accordance with IFRS 5, the assets and liabilities of the Group companies to be sold were reported in total as discontinued operations for 2018. This meant that the sales and earnings contributions of the IWM Automation Group, ELWEMA Automotive GmbH and the 51% investment MAX Automation (Shanghai) Co., Ltd. were no longer included in the consolidated income statement. The earnings after tax of the companies to be divested were shown in a separate item after the earnings from continuing operations. The profit for the period of the Group as a whole was calculated as the sum of both results. In September 2019, the twelve-month period provided for in IFRS 5, during which the disposals should have taken place, ended. Accordingly, the previously explained presentation as discontinued operation was reversed. The respective comparative figures for the prior-year period have been restated accordingly. In the consolidated balance sheet as of 31 December 2018, the assets and liabilities of all companies are included in their original positions again, which were reported separately in the consolidated financial statements for 2018 as discontinued operations in a single item as "Assets held for sale" and as "Liabilities directly associated with assets held for sale".

In addition, due to an error correction in accordance with IAS 8, the "previous year's figures after adjustment" are shown adjusted in a third column next to "previous year's figures as reported". More detailed information on the correction of errors can be found in the notes to the consolidated financial statements.

Detailed information on the scope of consolidation is contained in the notes to the consolidated financial statements.

Sales and result of operations

MAX Automation achieved a 5.3% increase in sales to mEUR 425.5 in 2019 by focusing on growth areas in its core business at the level of the Group as a whole (previous year: mEUR 404.0).

At Group level, the export share of sales rose by 11.9% to 63.2% compared to 2018 (previous year: 56.5%). With an increase in sales in Germany, Europe, the USA and the rest of the world, MAX Automation was able to grow in all foreign markets except China.

the Group's total output in 2019 decreased by 1.5% to mEUR 399.3 (previous year: mEUR 405.3), primarily due to changes in inventories and other revenues. Other own work capitalized increased by 15.0% to mEUR 2.3 (previous year: mEUR 2.0).

MAX Automation's other operating income increased to mEUR 11.1 (previous year: mEUR 8.6). In particular, income from the reversal of provisions increased, whereas the previous year's figure included income from deconsolidation.

The item investment property mainly comprises the property on Kesselbachstrasse in Bermatingen, Germany, which is rented under a lease. As a result of the discontinuation of the operating business of IWM Automation Bodensee GmbH, the property is no longer subject to own use and has been classified as investment property since 30 June 2019 due to the intention to rent it. Due to the transfer of the property to investment property, the adjustment to fair value in the amount of mEUR 2.8 occurred outside profit or loss via the revaluation reserve as well as in the amount of mEUR 2.6 in profit or loss as a reversal of an impairment loss in other operating income. The figure in the previous year was zero.

Income from exchange rate differences increased to mEUR 0.7 (previous year: mEUR 0.5).

Cost of materials decreased at a Group level by 15.6% to mEUR -202.7 (previous year: mEUR -240.2). At 50.8%, the cost of materials ratio – in relation to total output – was below the level of the comparable period (previous year: 59.3%).

Personnel expenses increased by 11.4% to mEUR -139.1 (previous year: mEUR -124.9). This includes expenses for the closure of IWM Automation Bodensee GmbH, in particular for severance payments and the transfer company for employees. The personnel expenses ratio – in relation to total output – therefore rose to 34.8% (previous year: 30.8%).

As a result of lower impairments of goodwill, depreciation and amortization for the Group as a whole fell by 31.9% to mEUR -14.9 (previous year: mEUR -21.9). This includes the special amortization of the goodwill of IWM Automation GmbH.

Other operating expenses of the Group increased slightly to mEUR -69.4 (previous year: mEUR -69.0) mainly for warranties and maintenance. Expenses from exchange rate differences rose to mEUR -1.2 (previous year: mEUR -0.8). The balance of currency effects of mEUR -0.5 (previous year: mEUR -0.3) results in an other operating expense ratio of 17.4% of total output (previous year: 17.1%).

In Group earnings before interest, tax, depreciation and amortization (EBITDA), MAX Automation achieved a significant improvement to mEUR -0.9 by concentrating on its strong core business with reduced volatility and lower risk (previous year: mEUR -20.3). Accordingly, the EBITDA margin at Group level improved to 0.2% (previous year: -5.0%) based on revenue.

In 2019, Group earnings before interest and taxes (EBIT) improved to mEUR -15.8 (previous year: mEUR -42.1), so that the EBIT margin reached -3.7% in relation to revenue (previous year: -10.4%).

the Group financial result of mEUR -18.1 (previous year: mEUR -4.0) was burdened in particular by write-downs for a loan and the utilization of a bank guarantee for the at-equity investment MAX Automation (Asia Pacific) Co. Ltd. as well as by a payment claim against the former Group company NSM Packtec GmbH, which was sold on 9 March 2018.

In 2019, Group earnings before taxes (EBT) improved by 27.6% to mEUR -34.3 (previous year: mEUR -47.4).

The income tax expense of MAX Automation was mEUR -1.2 (previous year: mEUR 3.8). Income taxes also reflect losses from discontinued operations due to existing fiscal unity.

The MAX Group closed 2019 with a 18.6% improvement in net income to mEUR -35.5 (previous year: mEUR -43.6). This resulted in earnings per share of EUR -1.18 (previous year: EUR -1.32).

Asset position

As of 31 December 2019, the Group recorded a decline in total assets of 7.1% to mEUR 332.4 (31 December 2018: mEUR 357.9). Fixed assets (excluding deferred taxes) are financed through equity and non-current liabilities. Current assets cover current liabilities.

Non-current assets increased by 20.9% to mEUR 141.1 (31 December 2018: mEUR 117.0) particularly due to the valuation of rights-of-use assets at mEUR 17.2 (31 December 2018: mEUR 0) as a result of the first-time application of IFRS 16 (Leasing). Intangible assets decreased by 52.0% to mEUR 6.8 (31 December 2018: mEUR 14.1). Mainly due to the special amortization of goodwill from IWM Automation Bodensee GmbH, goodwill decreased by 6.5% to mEUR 46.2 (31 December 2018: mEUR 49.4). Retained earnings increased by 33.0% to mEUR 46.3 (31 December 2018: mEUR 34.8).

Investment property, with the recognition of the property intended for rental from leases from IWM Automation Bodensee GmbH amounted to mEUR 7.5 (31 December 2018: mEUR 1.3). Long-term financial assets accounted for using the equity method decreased to mEUR 0 with the sale of the non-controlling interest in ESSERT GmbH (31 December 2018: mEUR 2.4). At mEUR 6.7, the value of other long-term financial assets was 5.7% below the previous year due to the issuance of a loan to the former non-controlling interest ESSERT GmbH (31 December 2018: mEUR 7.1).

Deferred tax assets increased by 38.4% to mEUR 10.4 (31 December 2018: mEUR 7.5), in particular due to higher losses carried forward.

Overall, the share of non-current assets in total assets rose to 42.5% (31 December 2018: 32.6%). Current assets fell by 20.7% to mEUR 191.0 (31 December 2018: mEUR 241.0), mainly due to the 37.0% reduction in inventories in the companies to be closed down and the error corrections in accordance with IAS 8 to mEUR 54.0 (31 December 2018: mEUR 84.8). Contractual assets were recorded with a decrease of 30.3% to mEUR 41.0 (31 December 2018: mEUR 58.8). Trade receivables decreased by 16.1% to mEUR 45.4 (31 December 2018: mEUR 54.1), mainly due to the forthcoming closures of the IWM Automation companies.

Tax receivables increased by 16.8% to mEUR 7.1 (31 December 2018: 6.1 mEUR).

As 31 December 2019, cash and cash equivalents increased by 21.1% to mEUR 40.6 (December 31, 2018: mEUR 33.5). Overall, the share of current assets in total assets fell to 57.5% (31 December 2018: 67.4%).

At the Group level, working capital rose by 5.9% to mEUR 72.0 (31 December 2018: mEUR 67.9). While working capital in non-core business decreased with the decline in new business due to the planned closures and final acceptance of open projects, working capital in the core business areas increased due to upfront expenditures for new orders.

Financial position

The capital structure in the MAX Group in 2019 fiscal year was influenced in particular by the restructuring of non-core business. Accordingly, the equity of MAX Automation as of 31 December 2019, decreased by -18.9% to mEUR 67.9 (31 December 2018: mEUR 83.6). The MAX Group thereby reported an equity ratio of 20.4% at the end of the year (31 December 2018: 23.4%).

Retained earnings decreased by 17.4% to mEUR 24.1 (31 December 2018: mEUR 29.2). The application of IAS 16 resulted in the recognition of a revaluation reserve of mEUR 11.3 for land and buildings (31 December 2018: mEUR 0). As a result of the sale of the non-controlling interest in ESSERT GmbH, a positive valuation difference of mEUR 0.3 was recorded for third-party interests (31 December 2018: mEUR -4.5).

As of 31 December 2019, the MAX Group recorded a net loss of mEUR -16.9 (31 December 2018: retained profit of mEUR 10.7).

Non-current liabilities increased by 54.0% to mEUR 152.5 (31 December 2018: mEUR 99.0). In particular, non-current liabilities to banks increased by 57.1% to mEUR 120.6 (31 December 2018: mEUR 76.8). Other non-current financial liabilities decreased to mEUR 0.3 with the termination of the investment agreement in connection with MAX Automation (Shanghai) Co. Ltd. (31 December 2018: mEUR 8.0). Other long-term provisions decreased by 15.9% to mEUR 4.2 due to the termination of long-term guarantee liabilities (31 December 2018: mEUR 5.0). Deferred tax liabilities increased by 58.7% to mEUR 10.9 with the revaluation in accordance with IAS 16 (31 December 2018: mEUR 6.9).

Current liabilities decreased by -36.1% to mEUR 112.0 (31 December 2018: mEUR 175.3). Trade payables decreased by -50.4% to mEUR 49.8 in particular due to the planned closure of the IWM Automation companies (previous year: mEUR 100.5).

Current liabilities due to banks decreased by 75.1% to mEUR 1.3 (31 December 2018: mEUR 5.3). Other current financial liabilities decreased by 21.8% to mEUR 15.7 (31 December 2018: mEUR 20.1). This included obligations of mEUR 4.0 from purchase agreements in the previous year. Provisions and liabilities from income taxes decreased to mEUR 2.2 (31 December 2018: mEUR 4.3).

Gross debt (current and non-current liabilities to banks) increased by 48.5% to mEUR 121.9 (31 December 2018: mEUR 82,1).

At mEUR 81.3 at the end of the year, net debt was higher than the previous year (31 December 2018: mEUR 48.6).

Liquidity development

The MAX Group recorded a cash outflow from operating activities for 2019 of mEUR -20.9 (cash inflow from the previous year: mEUR 20.6). The outflow in the period under review resulted in particular from the negative, cash-effective annual result with a constant need for working capital slightly above the previous year's level.

Investment activities resulted in an outflow of funds of mEUR 10.3 (previous year: mEUR 13.5). Of this amount, mEUR 6.2 was mainly attributable to investments in property, plant and equipment and mEUR 2.2 to payments for loans granted to ESSERT GmbH. In the previous year, payments of mEUR 10.8 were made for the acquisition of MAX Automation (Shanghai) Co. Ltd. and inflows of mEUR 2.9 were received from the sale of NSM Packtec GmbH.

The cash inflow from financing activities in 2019 was mEUR 38.8 (cash inflow from the previous year: mEUR 0.1) and reflects the increased utilization of the syndicated loan. The dividend payment of mEUR -4.4 also occurred in 2018. The distribution of a dividend was suspended in 2019.

Overall, there was a cash-effective increase in cash and cash equivalents of mEUR 7.6 in the 2019 fiscal year (previous year: mEUR 7.2). After taking into account changes in cash and cash equivalents of mEUR 0.6 due to exchange rate movements and changes in the scope of consolidation, cash and cash equivalents as of 31 December 2019, were up by mEUR 40.6 (31 December 2018: mEUR 33.5).

Segment reporting

MAX Automation SE and its Group companies serve the demand for technologically complex and innovative components and system solutions for efficient, flexible and networked automation in industrial production. The individual companies focus on solutions for specific sectors.

In the Process Technologies segment, the Group company bdtronic GmbH and its subsidiaries focus on the development and production of machinery and equipment and the associated software solutions for high-precision production processes (especially dispensing and impregnation), particularly in the automotive and electronics industries. With the solutions it offers, the segment benefits from global trends in the automotive sector towards high-performance driver assistance systems, electric drives and customer-specific, freely configurable devices.

In the Environmental Technologies segment, the Group company Vecoplan AG and its subsidiaries develop and install machinery and equipment for the sustainable use of primary and secondary raw materials, especially for the recycling, energy and raw materials industries. The segment offers various solutions for the efficient recycling of resources and waste with the aim of returning them to the production cycle or using them as substitute fuel for energy recovery. In view of increasingly scarce natural resources, the growing world population and rising energy consumption, sustainability has become a trend that, according to this segment's view, is increasingly becoming a factor in purchasing decisions.

The Evolving Technologies segment combines Group companies in the fields of optical solutions, medical technology solutions, industrial robotics and automation and packaging solutions. This segment comprises the Group companies NSM Magnettechnik GmbH, Mess- und Regeltechnik Jücker GmbH and MA micro automation GmbH and their subsidiaries iNDAT Robotics GmbH and AIM Micro Systems GmbH. The range of services includes the development and production of integrated assembly systems including the integration of robotics solutions, the development of control software and the provision of maintenance services. The segment offers solutions for the global trend toward automation and digitization in production. With solutions for medical technology, this segment also benefits from the growing global population and longer life expectancy, as well as the associated rise in demand for self-diagnostics and self-medication solutions.

In September 2018, the Supervisory Board of MAX Automation SE decided that the Group would withdraw from the construction of special machines and assembly lines for automotive customers. The companies IWM Automation Bodensee GmbH, IWM Automation Group, MAX Automation (Asia-Pacific) Co., Ltd in Hong Kong and MAX Automation Shanghai Co., Ltd as well as ELWEMA Automotive GmbH are combined in this Non-Core Business segment.

Process Technologies segment

Order intake in the Process Technologies segment fell by 10.3% to mEUR 62.5 (previous year: mEUR 69.7) as a result of orders placed by customers in 2020. Overall, however, the decline in order intake was less than the industry average, as the segment's waterproofing technology and proprietary dosing technology serve demand from important growth areas such as e-mobility. Particularly noteworthy is the large-volume order in October 2019 for the e-mobility platform of the automobile manufacturer Audi. As of 31 December 2019, the order backlog decreased by 31.3% to mEUR 24.7 due to the processing of existing orders (31 December 2018: mEUR 36.0).

The Process Technologies business unit made a strong contribution with an increase of 36.8% to mEUR 73.4 (previous year: mEUR 53.7), the largest contribution to the growth of Group revenue. Process Technologies generated 63.6% of its revenues outside of Germany (previous year: 59.1%).

In 2019, operative earnings before interest, taxes, depreciation and amortization (EBITDA) for the Process Technologies business unit rose by 23.9% to mEUR 14.8 (previous year: mEUR 12.0). As a result of expansion investments in production facilities, the EBITDA margin fell by 9.1% to 20.0% (previous year: 22.0%).

Working capital rose by 41.4% to mEUR 16.6 due to advance payments for new orders (previous year: mEUR 11.8).

The average number of employees excluding trainees in the Process Technologies segment rose by 22.2% to 368 in 2019 with the expansion of business activities (previous year: 301).

Environmental Technologies

At 21%, order intake in the Environmental Technologies segment rose better than the industry average to mEUR 140.3 thanks to its positioning with innovative products, especially for solutions for the sustainability and recycling megatrends (previous year: mEUR 116.0). In this context, Vecoplan AG and its subsidiaries benefited in particular from major projects in the USA and an increase in underlying business. Environmental Technologies recorded a 37.5% increase in the order backlog to mEUR 47.5 (31 December 2018: mEUR 34.6).

Environmental Technologies achieved an increase in revenues of 15.4% to mEUR 127.6 (previous year: mEUR 110.6), with 83.1% of the revenues (previous year: 79.8%) generated outside of Germany.

In 2019, operative earnings before interest, taxes, depreciation and amortization (EBITDA) for the Environmental Technologies segment rose by 28.8% to mEUR 12.9 (previous year: mEUR 10.0). The reason for the year-on-year increase in EBITDA was the higher revenue and the focus on more profitable projects and high-margin services, which also further improved the EBITDA margin by 11.1% to 10.0% (previous year: 9.0%).

Working capital rose by 22.4% to mEUR 17.6 due to advance payments for new orders (previous year: mEUR 14.4).

The average number of employees excluding trainees in the Environmental Technologies segment rose by 7.7% to 404 in 2019 with a well-filled order pipeline (previous year: 375).

Evolving Technologies

In the Evolving Technologies segment, order intake decreased by 18.8% to mEUR 113.5 versus a higher basis of comparison from special projects in the previous year (previous year: mEUR 139.7). Nevertheless, all areas of Evolving Technologies showed an encouraging development in demand; adjusted for a one-off major order in the medical technology sector in the same period of the previous year (mEUR 33.0), Evolving Technologies recorded a significant improvement in the order situation with an increase of 6.4%. The receipt of a major order in the low double-digit millions from the USA for medical technology optical systems in the fourth quarter of 2019 contributed to this. Overall, Evolving Technologies recorded a 21.7% decrease in the order backlog to mEUR 80.7 (31 December 2018: mEUR 103.1).

With the increasing importance of automation, especially in medical technology and the automotive supply industry, the Evolving Technologies division achieved a 19.4% increase in sales to mEUR 136.2 (previous year: mEUR 114.1). Evolving Technologies thereby made the largest contribution to Group revenue in the reporting period.

Due to a higher basis of comparison in the previous year, Evolving Technologies generated 31.0% of its revenues outside of Germany in 2019 (previous year: 46.5%).

In 2019, operative earnings before interest, taxes, depreciation and amortization (EBITDA) for the Evolving Technologies division rose to mEUR 16.9 taking into account special effects from fair value measurements and an error correction according to IAS 8 in the previous year (previous year: mEUR 2.9), which also increased the EBITDA margin to 12.4% (previous year: 2.6%).

Due to the increase in capital-intensive orders in the robotics segment, working capital rose to mEUR 7.7 (previous year: minus mEUR 0.6), but remained at a relatively low level overall due to the high advance payments for orders in the medical division.

The average number of employees excluding trainees in the Evolving Technologies segment in 2019 was almost unchanged at 549 (previous year: 547).

Non-Core Business

In the Non-Core Business segment, order intake fell by 22.6% to mEUR 63.6 due to the announced closures of the IWM Automation companies (previous year: mEUR 82.2). With the successive completion of ongoing projects in the companies to be closed, Non-Core Business recorded an overall decline in the order backlog of 46.2% to mEUR 46.6 (31 December 2018: mEUR 86.7).

The Non-Core Business segment recorded a decline in revenues of 29.7% to mEUR 89.8 (previous year: mEUR 127.7). The segment generated 82.6% of its revenues in international business, driven by ELWEMA Automotive GmbH (previous year: 64.8%).

For operative earnings before interest, taxes, depreciation and amortization (EBITDA) for 2019, the segment posted a further decrease of 1.5% to minus mEUR 36.6 (previous year: minus mEUR 36.0). Due to the decreased profitability of still existing projects, the EBITDA margin fell further to -41.0% (previous year: -28.0%).

Working capital in non-core business fell by 28.6% to mEUR 31.2 due to the decline in new business as a result of the planned closures and final acceptance of projects still open (previous year: mEUR 43.7).

The average number of employees excluding trainees in the Non-Core Business segment fell by 11.5% to 486 in 2019 (previous year: 550).

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