CLOSE-UP Annual Report 2011 CLOSE-Up Annual report 2011

Tüv Süd Ag

Tüv SüdCLOSE-UPAnnual Report2011

Germany

Munich USA

PhiladelPhia

South Africa

CAPE TOWN

33° 55' s 18° 25' E

39° 57' N 75° 10' w

48° 09' N 11° 35' E

India

New delhi

28° 40' N 77° 13' E

Tüv Süd AGWestendstr. 199

80686 Munich / Germanyphone:// +49 (0)89 5791-0fax:// +49 (0)89 5791-1551mail:// [email protected]

: // Tuev-Sued.com

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Published byTÜV SÜD AG Westendstr. 199 80686 Munich / Germany

phone / +49 (0)89 5791-0 fax / +49 (0)89 5791-1551

mail / [email protected] web / www.tuev-sued.com

© TÜV SÜD AG / Munich. All rights reserved.

Corporate CommunicationsMatthias Andreesen Viegas Jörg Riedle

Corporate Finance & AccountingReinhold Haas

PhotographySouth Africa Frederic Streicher Corbis: Angelo Cavalli

Germany Tillmann Franzen Corbis: Ocean, Paul Russel, Stevens Fremont

India Sorin Adrian Morar Corbis: Rob Melnychuk, Photo Alto

DesignStrichpunkt GmbH, Stuttgart and Berlin

www.strichpunkt-design.de

Production G. Peschke Druckerei GmbH, Munich

Tüv Süd Ag: // Tuev-Sued.COM Tüv

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tüv SüdCLOSE-UpAnnual report2011

195195 212 21216

60050

COunTRIeS

lOCATIOnS

eMplOYeeS

17,161

48° 09' N 11° 35' E

33° 55' s 18° 25' E

28° 40' N 77° 13' E

39° 57' N 75° 10' w

Tüv Süd AgTüv

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Germany

Munich USA

PhiladelPhia

South Africa

CAPE TOWN

33° 55' s 18° 25' E

39° 57' N 75° 10' w

48° 09' N 11° 35' E

India

New delhi

28° 40' N 77° 13' E

60050

COUNTRIES

LOCATIONS

EMPLOYEES

17,161210 21015 195

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phone / +49 (0)89 5791-0 fax / +49 (0)89 5791-1551











Division

Strategic business segment

∆

∆

InDuSTRY SeRVICeS

ReAl eSTATe SeRVICeS

RAIl

InDuSTRY

TÜV SÜD

PRODuCT SeRVICeS

MAnAGeMenT SeRVICeS

ACADeMY

CeRTIFICATIOn

1,271

1,356

1,410

1,553

1,678

2007

2008

2009*

2010*

2011*

* From continuing operations

F 01 tÜV SÜD StrUCtUrE

F 04 rEVEnUE (In € mILLIOnS)

F 03 rEVEnUE BY StrAtEGIC BUSInESS SEGmEnt (%)

AuTO SeRVICeS

AuTOMOTIVe

MOBIlITY

lIFe SeRVICeS

F 02 HEADCOUnt

13,185

2007

14,138

2008

16,058

2010*

14,459

2009* 2011*

17,161

t 01 KEY FIGUrES

THe GROuP AT A GlAnCe

2007 2008 2009* 2010* 2011*

IFRS IFRS IFRS IFRS IFRS

Business development (in € millions)

Revenue 1,270.7 1,365.2 1,409.9 1,552.5 1,677.7

Personnel expenses 725.7 795.2 847.0 900.1 986.2

Cash flow from operating activities 123.6 178.8 150.4 144.9 154.6

Capital expenditures 39.7 68.5 45.5 52.2 64.4

Income before taxes 115.9 106.7 101.6 123.4 133.6

Consolidated net income 52.1 68.6 72.4 74.6 107.2

eBT margin (%) 9.1 7.8 7.2 7.9 8.0

eBT margin, adjusted (%) 8.0 8.7 8.2 7.2 7.2

eBIT margin (%)** 9.1 8.9 8.7 9.2 9.5

eBIT margin, adjusted (%)** 10.2 9.8 9.7 8.5 8.5

Assets (in € millions)

non-current assets 716.2 749.0 761.7 823.2 824.1

Current assets 377.5 413.6 494.0 551.3 605.9

Total assets 1,093.7 1,162.6 1,255.7 1,374.5 1,430.0

equity ratio (%) 26.9 32.5 32.0 34.3 37.7

Employees (annual average)

Full-time equivalents 12,360 13,122 13,748 14,662 16,018

Employees (as of December 31)

Headcount 13,185 14,138 14,459 16,058 17,161

* From continuing operations** eBIT: earnings before interest, before currency translation gains/losses from financing measures and before income taxes;

including income from participations

CeRTIFICATIOn 24.9

InDuSTRY 39.6

MOBIlITY 35.4

OTHeR 0.1

2011

* Before taxes

1,677.7 133.6 64.4 revenue income*capital

expenditures

ImprInt


phone / +49 (0)89 5791-0 fax / +49 (0)89 5791-1551











Division


∆

∆

InDuSTRY SeRVICeS


RAIl

InDuSTRY

TÜV SÜD

PRODuCT SeRVICeS

MAnAGeMenT SeRVICeS

ACADeMY

CeRTIFICATIOn

1,271

1,356

1,410

1,553

1,678

2007

2008

2009*

2010*

2011*





AuTO SeRVICeS

AuTOMOTIVe

MOBIlITY

lIFe SeRVICeS

F 02 HEADCOUnt

13,185

2007

14,138

2008

16,058

2010*

14,459

2009* 2011*

17,161

t 01 KEY FIGUrES


2007 2008 2009* 2010* 2011*



Revenue 1,270.7 1,365.2 1,409.9 1,552.5 1,677.7






eBT margin (%) 9.1 7.8 7.2 7.9 8.0


eBIT margin (%)** 9.1 8.9 8.7 9.2 9.5




Current assets 377.5 413.6 494.0 551.3 605.9

Total assets 1,093.7 1,162.6 1,255.7 1,374.5 1,430.0

equity ratio (%) 26.9 32.5 32.0 34.3 37.7




Headcount 13,185 14,138 14,459 16,058 17,161



CeRTIFICATIOn 24.9

InDuSTRY 39.6

MOBIlITY 35.4

OTHeR 0.1

2011

* Before taxes


expenditures

For almost 150 years, TÜV SÜD experts have been working to make our world a safer place. Their aim: to maintain a decisive technological edge on the com-petition. Each and every day, more than 17,000 employees give serious consid-eration to the issues that concern people today and that will concern them in years to come. Our experts and engineers share the common goal of bringing together people, technology and the environment. At more than 600 locations in some 50 countries, they increase safety and add economic value for our customers. Leveraging innovative services, they optimize technology, systems and expertise. In a series of »close-ups«, this annual report examines some of the specific questions our employees have been concerned with during the past year – and that, we believe, concern people the world over: How, given the growing popula-tion, can we enable mobility in the future? What has to be done to make sure the new energy concept succeeds? How do we ensure the safety and quality of food? And, in addition to all this, how can we get even closer to our customers? We invite you to check out our »close-ups« and join us on a voyage of discovery through the world of TÜV SÜD.

Management and Supervisory Board

1Close-up

2Group Management Report

3Consolidated Financial Statements

42

1 2 3 4 ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS

50 I Business operations

58 I Macroeconomic development and developments

in relevant markets

63 I Business review and economic situation

66 I Net assets, financial position and results of operations

82 I Non-financial performance indicators

93 I Risk report

100 I Subsequent events

100 I Foundation

101 I Opportunities and outlook

6 I Message from the Board of Management

10 I On site worldwide

12 I Supervisory Board report

16 I E-Mobility

The future is an open road

24 I EnErgy

The untapped resource

32 I FooD

Our daily bread

40 I growth

In Africa

106 I Consolidated income statement

107 I Consolidated statement of comprehensive income

108 I Consolidated statement of financial position

109 I Consolidated statement of cash flows

110 I Consolidated statement of changes in equity

112 I Notes to the consolidated financial statements

162 I Auditor’s report

163 I Corporate boards

taBle oF ContentS

3

TÜV SÜD ANNUAL REPORT 2011

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1 2 3 4 ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS

Content

Page 6

Message froM the

Board of ManageMent

Page 10

on site worldwide

Page 12

supervisory Board

report

Chapter 1Management and Supervisory Board

Content

Page 6

Message froM the

Board of ManageMent

Page 10

on site worldwide

Page 12

supervisory Board

report

axel Stepken

peter klein

dirk eilerS

HorSt SCHneider

karSten xander

MeSSage FroM tHe Board oF ManageMent

ladieS and gentleMen,Throughout the world, 2011 was characterized by economic and political changes. TÜV SÜD

developed well in this environment in the past year.

Our company recorded organic growth of almost 10%. Overall, our growth totaled more than 8%,

as we sold some subsidiaries in Asia and Europe for strategic reasons in 2011. At just under € 1.7 billion,

revenue reached a new record level, with all strategic business segments again contributing to

this positive development. Since 2007, our revenue has increased by 32%. Income before taxes also

increased by more than 8% year-on-year to € 134 million in 2011. The return on sales, calculated using

income before taxes, stands at 8%. Consolidated net income for the year also increased significantly

in 2011.

These figures show that growth and earnings power go hand in hand at TÜV SÜD. We want to grow

profitably – and we have achieved this goal yet again in 2011.

We generated around 35% of our revenue outside Germany in 2011 – two percentage points more than

the prior year. We aim to increase this figure to 40% in the medium term.

The economic performance of TÜV SÜD is also reflected in the statement of financial position. Our

equity ratio increased again in 2011 and now stands at almost 38%. This creates power and independ-

ence for TÜV SÜD’s future development.

We are leveraging this power to continue investing in the company’s future: we spent some € 64 million

for this purpose in 2011. The investment volume for 2011, excluding business acquisitions, was there-

fore some 23% up on the prior-year figure.

7


Our sustainable growth also received external recognition in the past year: in the fall of 2011,

TÜV SÜD won the bronze medal in the coveted TOP 500 Award presented by »Die Welt« publishing

group, placing us third among Germany’s leading companies. The jury praised our sustainable revenue

and earnings growth during the past five years as well as the innovative power and successful

globalization of our business. Before that, TÜV SÜD had won strategy consulting firm Roland Berger’s

»Best of European Business« award for its successful expansion strategy in South-East Asia in

February 2011.

Our economic strength is also the basis for safeguarding jobs and increasing headcount. TÜV SÜD

created around 1,100 new jobs in the past year – most of them abroad, and around 400 in Germany. At

year-end, 17,161 people worked for our company worldwide. TÜV SÜD is increasingly regarded as

an attractive employer: in 2011, we placed high in several respected employer rankings – ahead of our

competitors. We are very proud of this result, because we know that TÜV SÜD’s success is due above

all to the knowledge and hard work of our employees all around the world. They guarantee the success

of this company. As the Board of Management of TÜV SÜD, we would like to thank all employees for

their efforts in 2011.

Business development in 2011 shows that our company is in a good position. The strategic realignment

of the past years is bearing fruit. We pressed ahead with this process in 2011 and began streamlining

our service portfolio as part of the TÜV SÜD FIT 2012+ program. This gives us the scope to target investments

in the strategic growth areas and thus continue our international expansion.

We are concentrating our strengths in our core competencies. To this end, we have taken another

step toward focusing our activities through divestitures, including the sale of the TÜV SÜD Life

Science division and the student training business. At the same time, we are creating opportunities

for our future growth through targeted acquisitions.

We are currently working systematically on improving our position in international growth markets

and want to win new market segments and develop new target groups. In the past year, we further

strengthened our international competitiveness, above all in Asia, South Africa, Western Europe and

North America, by stepping up the globalization of our activities.

ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS

8

1 2 3 4

In addition to developing new markets, we are using systematic innovation management to tap into

the potential of future technologies. Whether in electromobility, renewable energies, embedded

systems or energy efficiency – our customers of today can count on our knowledge and understanding

of the technologies of tomorrow. But that’s not all: we actively help shape these disciplines and make

our knowledge available to others.

For example, we have been active in the field of electromobility for several years. In 2011, our activities

included developing a worldwide network of battery test labs with its main facility in Garching near

Munich. At this lab, which provides more than 1,000 square meters of laboratory space and considerably

more than 100 test stations, we test batteries for safety, power and reliability under extreme conditions.

The new test lab in Germany supplements our facilities in the USA, Canada, Singapore, China and the

UK. Other facilities in Korea and China will follow in 2012. Our goal is clear: we want to become the

top international provider of testing and certification services for safety in electromobility.

We are working every bit as systematically on many other fields of innovation. For example, we are

active in the area of embedded systems. These integrated systems are playing a key role in our

increasingly automated and networked world. They are the »brain« of many devices and systems, and

are deployed for measuring, controlling and regulation tasks in all sectors. Our group-wide compe-

tence center in Munich already offers a large number of services in this area – for example, for the

development of smart electricity grids.

We add value for our customers with our innovations and tried-and-tested products. This standard

applies just as much today as it did when our company was founded almost 150 years ago.

Munich, april 26, 2012

tHe Board oF ManageMent oF tÜv SÜd ag

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01g

gerMany01 rEgion

aMeriCaS02 rEgion

weStern europe03 rEgion

Central & eaStern europe04 rEgion

Middle eaSt/aFriCa05 rEgion

SoutH aSia06 rEgion

greater CHina07 rEgion

aSean08 rEgion

korea09 rEgion

japan

on Site worldwide


10

1 2 3 4

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06

0504

07

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11


SUPERVISORY BOARD REPORT

LADIES AnD GEnTLEmEn,TÜV SÜD continued its successful business development in 2011. The strategic realignment of the

TÜV SÜD Group initiated in 2009 has delivered further results.

Even in a year characterized by great political and economic uncertainty as well as a number of

far-reaching changes, TÜV SÜD proved itself to be robust and profitable.

In the reporting year, the Supervisory Board performed the tasks required of it by law and the articles

of incorporation and bylaws. We regularly monitored the Board of Management’s leadership of the

company and offered advice as required on the strategic development of the TÜV SÜD Group as

well as on significant current measures, particularly the acquisitions and divestitures performed in

the fiscal year 2011.

The Board of Management provided us with regular, comprehensive and timely written and verbal

reports on the general situation of the TÜV SÜD Group, current business development, business

planning, strategy orientation, and the risk situation, including risk management. Quarterly reports

supplemented the flow of information. Variances from planning were explained to us in detail. In

addition, the Board of Management discussed the TÜV SÜD Group’s strategic orientation with us.

At the four meetings in 2011, we discussed, among other things, the separate and consolidated

financial statements for 2010, as well as group strategy, and planning for 2012 to 2014.

We dealt in detail with the various business acquisitions and divestitures as well as risk manage-

ment. One particular focus of our meetings was on supporting the TÜV SÜD FIT 2012+ efficiency

program initiated by the Board of Management.

Important progress was made in implementing the program, which aims to increase competitiveness

and further enhance efficiency. The systematic focus on the core business of the TÜV SÜD Group

and targeted business combinations will further strengthen the company for the future.

Personal meetings were also held on a regular basis between the Chairman of the Supervisory

Board and the Chairman of the Board of Management. This ensured that the Supervisory Board

was kept informed in detail about the company’s situation and plans.

The separate financial statements of TÜV SÜD AG, the consolidated financial statements and the

combined management report were audited by KPMG AG Wirtschaftsprüfungsgesellschaft, Munich,

who issued an unqualified audit opinion. These documents and the audit reports were made

available to the members of the Supervisory Board and discussed at length at the Supervisory

Board’s closing meeting on April 26, 2012, in the presence of the auditor, who presented a report on


12

1 2 3 4

the main results of the audit. We conducted an extensive review of the financial statements of

TÜV SÜD AG, the consolidated financial statements and the combined management report.

We agreed with the findings of the auditor and have no objections following the final result of our

review. We approve the financial statements and consolidated financial statements. We recommend

that the shareholders ratify the financial statements, approve the consolidated financial statements

and the combined management report, and the proposal from the Board of Management for the

appropriation of profits.

Changes were made to the composition of the Supervisory Board in 2011:

Mr. Zygmunt Mierdorf retired from the Supervisory Board after the annual general meeting on May 13,

2011. Dr. Christine Bortenlänger, member of the Board of Management of Bayerische Börse AG, was

elected to the Supervisory Board in his stead.

As of December 31, 2011, Mr. Johann Schwaiger retired from the company and from the Supervisory

Board of TÜV SÜD AG on reaching retirement age. Employee representative Mr. Reinhold Rieger joined

the Supervisory Board as his elected replacement.

The Supervisory Board thanks Mr. Mierdorf and Mr. Schwaiger for their work and trustful cooperation,

and wishes the newly appointed members of the Supervisory Board, Dr. Bortenlänger and Mr. Rieger,

every success in their tasks.

On behalf of the Supervisory Board, I would like to thank the members of the Board of Management,

executives, employees and employee representatives for their successful work and exemplary com-

mitment in the fiscal year 2011.

proF. dr.-ing.

HanS-jörg BullingerChairman of the Supervisory Board of tÜv SÜd ag

Munich, april 26, 2012

13



14

1 2 3 4

Content

Page 16

E-Mobility

Page 24

ENERGy

Page 32

FooD

Page 40

GRoW tH

Chapter 2Close-UP

Content

Page 16

E-Mobility

Page 24

ENERGy

Page 32

FooD

Page 40

GRoW tH

Germany

MunichPage 18

SingapOREpagE 23

E-MOBILITY

South Korea

SeoulPage 23

01° 17' N 103° 50' E

48° 09' N 11° 35' E

37° 34' N 126° 59' E

e-mobilitY

01° 17' N 103° 50' E

48° 09' N 11° 35' E

37° 34' N 126° 59' E

Germany

MunichPage 18

SingapOREpagE 23

E-MOBILITY

South Korea

SeoulPage 23

01° 17' N 103° 50' E

48° 09' N 11° 35' E

37° 34' N 126° 59' E

Jörn Kieckbusch loves extremes: when the 36-year-old sets to work on his test pieces, they have to withstand temperature fluctuations of 200 degrees Celsius. In the course of endurance tests, they are jolted and shaken, exposed to extreme humidity and dryness, and pushed to their very limits – and, in the best case scenario, they function just as well afterwards as they did before. Jörn Kieckbusch is an electrical engineer and tests batteries of the kind used, for instance, in electric vehicles.

This sector is a real live wire: management consultants A.T. Kearney anticipate the future global market for electric vehicles to be worth as much as € 280 billion. They forecast that by 2020 one in ten new vehicles could be an electric or hybrid. In view of these prospects, it’s no surprise that almost every major manufacturer is working intensively on getting e-mobiles ready for series produc-

tion. Also, the big auto shows in Frankfurt am Main, Geneva, Detroit and Beijing all focused on this revolution in mobility.

One-Of-a-kind cOmpetency center

»The beating heart of any e-vehicle concept is the battery,« says Stefan Rentsch, who, together with his colleague Daniel Quinger, heads up the business of TÜV SÜD Battery Testing. The TÜV SÜD joint venture with development service provider LION smart specializes in putting batteries for electric vehicles through their paces.

To this end, TÜV SÜD has set up a competence center which is quite likely the only one of its kind: a highly skilled team of 50 experts, working within a worldwide network of

e-Mobilitythe future is an open roadHow can we ensure mobility for future generations? electric vehicles, which automakers worldwide are currently researching, are one sure-fire solution. and tÜV SÜd is playing a pioneering role with this new technology.

taKe it to the liMit

manfred Stelz prepares parts of a battery for testing. Various driving cycles will later be simulated under different climatic conditions in the environmental chamber.

19


Munich / 48° 09' noRTh, 11° 35' EAST

aMbitious goal

Jörn kieckbusch has been with tÜV SÜd Battery testing right from the start. With a skilled team, general managers daniel Quinger and Stefan rentsch (photo right) aim to make the company the global market leader in battery testing.

eleCtriCity: the Driving forCe

the battery is the beating heart of any electric vehicle. it must be robust, efficient and have a long life. after all, it accounts for almost 70% of the cost of an e-vehicle. the batteries are put through their paces using special test equipment.

between the electrical energy storage devices, the battery management system and the temperature management system. »When the process is complete, automobile manufacturers know exactly whether they can use their batteries as planned – or whether additional development is required.«

Today, almost everything tested by TÜV SÜD Battery Testing is top secret. When it comes to e-mobility, the automobile industry is not generally talkative. That makes the praise with which vehicle manufacturer Volkswagen thanked the TÜV SÜD experts all the more impressive: »Our collaboration on the safety qualification of battery cells was characterized by a particular cooperativeness. The project was conducted with great dedication and to our complete satisfaction.«

test centers, takes a long hard look at all kinds of modern electrical energy storage products – from small cell-phone batteries to battery packs for electric sports cars, which can easily weigh half a metric ton. At test facilities in the USA and Canada, Great Britain, Germany, Singapore and China, the experts test the safety of electrical storage equipment in accordance with international standards as well as manufacturers’ specific requirements and provide information on their capacity and reliability in use.

»We test everything from individual cells, to modules, right through to complete systems,« explains Rentsch. One key aspect is whether the batteries are protected against overcharging or mechanical stresses – and how they respond when subjected to vibration or humidity. At system level, the main focus is on smooth interaction

Munich / 48° 09' noRTh, 11° 35' EAST

20

1 2 3 4 ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4

SEoul / 37° 34' noRTh, 126° 59' EAST SingApoRE / 01° 17' noRTh, 103° 50' EAST

unpreCeDenteD aDvanCes

50 years ago, South korea’s economy was dominated by agriculture. today, the country is one of the most important and wealthy industrial nations in the world.

islanD of KnowleDge

Singapore is one of South-east asia’s growth centers. numerous high-tech companies and scientific and research institutes are based in the city.

Drive by wire

seoul Today’s cars are safer than ever before: manufac-turers are focusing in particular on safety-related functions, such as braking systems. Partly to reduce the weight of the cars of the future, manufacturers are conducting in-depth research into how these systems can be controlled electrically. But what happens when multiple systems of this kind are operated exclusively »by wire« – and when, for example, the steering is no longer linked mechanically to the front wheels?

Published in 2011, the international ISO 26262 standard, governs electrical and electronic safety-relevant systems for installation in series production cars. The aim is to meet the current high standards and develop them further. ISO 26262 was developed in close collaboration with TÜV SÜD. Among those leveraging this expertise is a major Korean manufacturer, who is applying it to develop its future electric vehicle fleet: TÜV SÜD provides advice and assistance throughout the entire development process for new safety systems, keeping a close eye on factors including how hardware and software compo - nents interact with other electronic components inside or outside the vehicle. All this helps ensure that safety remains the top priority in the age of electromobility.

Charging network

singapore How can e-mobility make the transition from niche product to a mass product? In addition to efficient and affordable vehicles, infrastructure will play a key role: electric vehicles have to be able to be charged quickly, easily and just about anywhere.

In Singapore, TÜV SÜD is taking part in a project that has set itself precisely these goals. As part of a pilot project, the South-East Asian city state, which considers itself a pioneer in the field of electromobility, is currently examining the requirements that have to be met by a close-knit, functioning network of electrical charging stations. On behalf of the government, Robert Bosch GmbH developed an overall solution for charging e-vehicles and a close-knit network of charging stations, including the design of and technology for the charging stations. And Bosch called in TÜV SÜD to provide expert advice. The challenge: to demonstrate that the charging network complies with Singapore’s stringent safety standards – no mean feat given the totally new nature of the technology. Following comprehensive tests and safety checks, TÜV SÜD gave the green light: And the streets between Orchard Road and Singapore River are now ideally equipped for drivers of electric vehicles.

23


energY

India

New delhiPage 26

20° 54' N 74° 46' EIndia

shivajinagarPage 31

28° 40' N 77° 13' E

energY

20° 54' N 74° 46' E

28° 40' N 77° 13' E

energY

India

New delhiPage 26

20° 54' N 74° 46' EIndia

shivajinagarPage 31

28° 40' N 77° 13' E

Solar panels on the roof of the taj palace Hotel heat service water. energy manger aalta moitra and anudeep Hajela from tÜV SÜd have calculated the resulting energy savings.

neW delHi / 28° 40' n, 77° 13' e HarneSSing tHe Sun

26


nEw dElhi / 28° 40' noRTh, 77° 13' EAST

Every day, Anudeep Hajela fights to secure the energy supply of tomorrow. The 29-year-old TÜV SÜD South Asia employee has one goal: to ensure that electricity, heating and cooling remain available and affordable in the future. To this end, he promotes a totally new way of using energy to companies, private individuals and government offices around the Indian megacity of New Delhi.

Hajela is trying to enlist customers to use a vast energy source. In every power plant, company and building, there are huge resources waiting to be tapped. Just how large they actually are no-one can say, not even Anudeep Hajela. The International Energy Agency estimates that they could add up to between 15% and 30% of global energy consumption – each and every year. What’s more, these resources are totally environmentally

and climate friendly, and relatively easy to harness. They are spread evenly across all the regions of the world and are inexhaustible – on every continent.

What we are talking about here is not some new, particularly sustainable form of energy generation. The vast resource in question is energy efficiency. Every day, Anudeep Hajela, regional manager for energy and environmental services in north India, convinces his customers that it pays to invest in more efficient cooling systems, more modern production facilities or better insulated office buildings. For some time now, developing economies – above all the densely populated countries of India and China – have been using more energy than the OECD countries.

energythe untapped resourceWith the earth’s fossil resources becoming scarcer and global demand rising, where will the energy of the future come from? the time is ripe for the dawn of a new energy era.

27



SaVingS WitHOut SacrificeS

Take New Delhi, for example. The luxury Taj Palace Hotel in the up-market Chanakypuri district is one of the Indian capital’s finest addresses and part of the global Taj Hotels Resorts and Palaces chain, which has some 100 high-class hotels on all continents. In a process lasting several weeks, consultants from TÜV SÜD subjected the energy consumption of the Taj Palace Hotel to close scrutiny – from the air-conditioning system for more than 400 rooms, to the entire electricity supply, through to service facilities such as the hotel’s own laundry. In the end, the Taj Palace Hotel received an overview showing precisely where energy consumption was greatest – and where tangible energy savings were economically feasible. »Around 15% of the energy could be saved through manageable investment,« says Anudeep Hajela. And, equally impor-tantly, these savings were achievable without making a stay at the Taj Palace Hotel any less comfortable or pleasant for guests.

Because there is rising global demand for services like those of the Taj Palace Hotel, TÜV SÜD has pooled its services relating to energy efficiency in a comprehen-sive approach. To ensure that energy remains available and affordable in the future, the Group offers worldwide support – from consulting for companies, to testing and certification of efficiency measures, through to training and seminars. The benefits: TÜV SÜD experts provide customers from all sectors with support for forward-looking energy concepts within the company, and an objective analysis of the costs and benefits of investing in more efficient systems. After all, energy efficiency should make economic sense.

»For many companies, it is every bit as important to document their sustainability for their own customers and employees,« says Hajela. »The fact that TÜV SÜD provides independent and impartial assessments means that our services enjoy a high level of acceptance.«

the CrèMe De la CrèMe

the luxury taj palace Hotel is the finest address in the indian capital, new delhi. for today’s guests, it’s no longer just excellent service that counts; sustainability is also becoming increasingly important.

a gliMpse behinD the sCenes

above: guests don’t normally see the hotel’s service facilities, for example the in-house tailor’s shop. right: the electricity for these facilities, like that for the guests, is supplied and controlled centrally.

28



ShivAjinAgAR / 20° 54' noRTh, 74° 46' EAST

life-giver

Without the sun, there would be no life on earth. modern technologies and large-scale projects make it possible to use the sun to help generate electricity on a large scale.

Catching the sun shivajinagar Savings through enhanced efficiency are one way of ensuring there is sufficient energy for future generations. Restructuring the energy supply by shifting the focus from fossil fuels to renewable energies is another. The United Nations’ target is for 30% of the energy consumed worldwide to be provided by wind, sun, water or geothermal energy by 2030. At present, these sources account for about 13%.

A landmark project for the new energy concept is being implemented in the Indian state of Maharashtra, where the world’s largest photovoltaic power plant is taking shape near Shivajinagar. In the first construction phase, a rated capacity of 125 megawatts is planned to meet the electricity needs of around 400,000 people in the region. Two different technologies are being used. Crystalline silicone modules will be deployed in three blocks, each with a capacity of 25 megawatts, and thin-film modules

in two further blocks. The entire power plant comprises five blocks that are networked with each other.

TÜV SÜD is delivering support for the large-scale project. The experts are responsible for quality assurance throughout the entire construction process, through to commissioning of the plant. The company’s tasks include testing the individual photovoltaic modules, handling quality assurance during construction, and monitoring the connection of the module blocks to each other and to the grid – factors that are critical for the functionality and performance of the power plant as a whole. The costs for erecting the Shivajinagar Sakri power plant total INR 20 billion (some € 300 million).

Admittedly, solar energy still plays a relatively minor role in the global energy mix – a mere 0.1% of the electricity consumed globally is generated using the sun. However, major projects like the photovoltaic power plant in Shivajinagar make an effective contribution to achieving the IEA’s target of 5% by 2030.

31


FOOD

India

BANGALOREpAGE 34

USA

PhiladelPhiaPage 39

12° 57' N 77° 37' E

39° 57' N 75° 10' w

FOOD

12° 57' N 77° 37' E

39° 57' N 75° 10' w

FOOD

India

BANGALOREpAGE 34

USA

PhiladelPhiaPage 39

12° 57' N 77° 37' E

39° 57' N 75° 10' w

When Namrata Gupta reaches for a pot of strawberry yoghurt, she’s not generally interested in the taste or the creamy consistency. Instead of enjoying spoon after spoon of the dairy product, the 32-year-old uncompromis-ingly puts it to the test: using alcohol, chloroform, benzene, ether and dozens of other chemicals, Gupta breaks the foodstuff down and examines its innermost structure to determine its precise composition. How much sugar does that sparkling orange soft drink really contain? Are these potato chips really organic, or are traces of pesticide detectable? And just how fresh is that appetizing, red-colored salami?

Everyone has to eat and drink. We need at least some 100 kilojoules – equivalent to roughly 20 grams of rice – for each kilogram of body weight every day. Our metabolic rate increases depending on what we do – for example, during hard physical work or sport. In addition, our metabo-lism requires at least one-and-a-half liters of liquid a day in order to function normally.

»How healthy is that soft drink really? And are these potato chips really organic, or do

they contain traces of pesticides?«

foodour daily bread

fooD test

Junk food or healthy snack? Only painstaking analysis of food can reveal just how much fat, sugar and vitamins a product really contains.

there’s a saying that you are what you eat. So it’s hardly surprising that people increasingly want insight into the quality of the food we eat every day. companies like tÜV SÜd provide answers – through a global test and monitoring network.

35


bAngAloRE / 12° 57' noRTh, 77° 37' EAST


deSire fOr Safety and cOntrOl

So you could say that food is life. Small wonder, then, that the desire to know what exactly we are eating is on the rise worldwide. Experts estimate the market as a whole for testing, certification and monitoring of food, food producers and supply chains to be worth more than € 3 billion. Manufacturers, retailers and consumers around the globe want precise information on the contents of their food – in industrialized nations and in emerging and developing countries alike. The issue of safety – in other words, food and drink that is in pristine condition and does not pose a health hazard – plays just as great a role as that of the composition, i.e., the exact amount of fat, carbohydrate or vitamins contained. Calls for monitoring and safety are fueled not only by global trade, but also by the growing importance of convenience foods and by a growing desire among consumers for quality and organic foodstuffs.

With is network of test facilities across the world, TÜV SÜD is supporting this trend. On behalf of manufac-turers and retailers, hundreds of staff at state-of-the-art laboratories provide transparency with regard to food – no matter whether fresh fish, milk powder or candy. In addition to its labs in North America and Europe, the company has systematically invested in test facilities in Asia in recent years, for example in Shenzhen, China, and in Bangalore and New Delhi in India. The importance of South America is also set to increase in the future.

Whether Italian red wine, beef steak or exotic curry powder: TÜV SÜD ensures safety and increases transpar-ency. After all, food is more than a basic necessity: it keeps »body and soul together«, as the Greek philosopher Socrates put it more than 2,500 years ago. And there’s one thing it should never do – damage people’s health.

»All over the world, people want to know what’s

in their day-to-day food.« an eye for Detail

Safety is more important with food than with almost any other product. the ingredients of honey or mineral water are absorbed directly by our bodies.

36



Whether local specialty or convenience foods for the world market, all the products that find their way to our tables are put to the test at tÜV SÜd’s food laboratories.

BangalOre / 12° 57' n, 77° 37' e fOOd cHain

37


philAdElphiA / 39° 57' noRTh, 75° 10' wEST

Quality you can taste

philadelphia It takes good ingredients to manufacture good food products. But excellent meat, fresh water and high-quality grain don’t automatically add up to food that is tasty and healthy. How food is processed, transported and stored is every bit as important as the ingredients. Whether in the local butcher’s store or a major food corpora-tion, it is the quality of the processing that determines the quality of the end product.

At Keystone Foods, they take this quality very seriously. The company is one of the largest food manufacturers in the world. 55 operational facilities in North America, Europe, the Middle East and Asia are managed from group headquarters in a suburb of Philadelphia in the US state of Pennsylvania. Every year, around 13,000 employees in 13 countries process more than one million metric tons of meat and fish to create finished products including chicken nuggets, fish fingers or hamburger patties, which are then prepared at fast-food outlets, restaurants or cafeterias.

To promote and provide proof of quality at seven of its US facilities, Keystone Foods called in support – from TÜV SÜD, one of the largest service providers for quality management systems in the food sector. In a process lasting just under a year, the experts from TÜV SÜD America inspected all relevant Keystone plants, supported the implementation of a quality and crisis-management system and ultimately gave the green light. Since March, Keystone Foods USA has been certified to the BRC Global Standard for Food Safety, which provides objective and independent verification with regard to hygiene, safety regulations, staff and quality.

By tasking TÜV SÜD with the certification, Keystone Foods chose a company with a strong expertise in this field. The company is, among other things, a leading provider of certification services for IFS (International Food Safety Standard) and the international ISO 22000 standard for foodstuffs and animal feed. TÜV SÜD also supports food manufacturers and retailers with its own quality seals. For example, retailers in Germany can demonstrate their commitment to hygiene and service by means of »FilialQualität« (store quality) certification. All of this means that, when consumers next eat out, they can be sure they have the best possible product on their plate.

enjoy your Meal

above: keystone foods provides convenience foods for customers including fast-food chains and cafeterias.

the lanD of plenty

left: indian curry, mexican tacos, and italian pasta – our supermarkets have long been part of the globalized food industry.

39


South Africa

MiddelburgPage 42

Growth

South Africa

Cape Townpage 47

25° 54' s 29° 14' E

33° 55' s 18° 25' E

GROWTH

25° 54' s 29° 14' E

33° 55' s 18° 25' E

South Africa

MiddelburgPage 42

Growth

South Africa

Cape Townpage 47

25° 54' s 29° 14' E

33° 55' s 18° 25' E

With practiced efficiency, Braam Botha attaches his ultrasound test device to an area marked in white on the steam line in unit 4. The electricity generation unit of the Duvha power plant in the northeast of South Africa – one of a total of six – usually produces 600 megawatts of power. From here, ESKOM, Africa’s largest energy provider, supplies electricity to cities including Johannes-burg and Pretoria. But for some six months now, the gigantic boiler area, which towers to a height of more than 80 meters, has been cold: due to serious turbine damage in February 2011, unit 4 is currently offline and undergoing a major overhaul. For Braam Botha, the unscheduled downtime is an excellent opportunity to minutely examine the otherwise scorching-hot pipes

that channel hot steam at temperatures of more than 500 degrees during normal operations, and to check them for material defects.

Braam Botha is an NDT advisor – a specialist in non-destructive testing of plant sections – at Pro-Tec Inspection & NDT Services. Armed with ultrasound, sonar or x-ray technology, he is out in the field every day working for safety: constantly seeking out invisible dents in metal pipes, hairline cracks inside pressure vessels, or weak points that are undetectable to the human eye. If he discovers irregularities, he raises the alarm – and the power plant management at Duvha or one of the other plants he tests can rapidly initiate appropriate repairs.

growth in africa280 people now work for tÜV SÜd in South africa. their mission: to increase safety in the country at africa’s southern tip.

the golDen age

South africa’s economy is the largest in africa. Braam Botha from tÜV SÜd subsidiary pro-tec helps make sure that the country’s energy requirements can be met at all times.

43


MiddElbuRg / 25° 54' SouTh, 29° 14' EAST

gerMan, english, afriKaans

South-africa-born norman van Oudtshoorn has been in charge of tÜV SÜd South africa since 2010. Before this, van Oudtshoorn held a variety of positions at tÜV SÜd in europe for more than 15 years.

a BOOming cOuntry in tHe SOutH Of africa

»With the acquisition of Pro-Tec, TÜV SÜD has instantly become one of the most important companies in the field of non-destructive testing in the whole of Africa,« says Norman van Oudtshoorn, CEO of TÜV SÜD South Africa. Conditions in South Africa provide an excellent basis for driving business development: with some € 275 billion GDP, the country is the continent’s largest economy by far. South Africa is rich in mineral resources such as chrome, gold and hard coal – and is now, two decades after the end of apartheid, considered one of the most stable democracies in the continent.

»TÜV SÜD in South Africa: a blueprint for developing new markets«

Pro-Tec has been a member of the TÜV SÜD Group since September 2011. Founded in 1995, and with its registered office in Middelburg, an industrial city with over 100,000 inhabitants some 150 kilometers east of Johannesburg, the company is South Africa’s largest provider of non-destructive testing. Its customers include global players such as Mittal Steel, paper manufacturer Saapi, and ESKOM.

The range of services delivered by Pro-Tec’s approxi-mately 180-strong workforce is an ideal fit for TÜV SÜD: almost 150 years ago, testing the safety of steam boilers was at the heart of the TÜV associations of the time. And today, testing plant subject to inspection requirements, such as power plants, chemical facilities or filling stations, remains the service provider’s core business.

safety heaDQuarters

the city of middelburg lies in the heart of South africa’s coal-producing mpumalanga province. the city is built around Walter Sisulu Street. pro-tec’s headquarters are also located in the center of town.

44



africa’s largest energy provider eSkOm supplies electricity to the south of the continent. Working hand in hand with power plant staff, tÜV SÜd ensures that the lights

between cape town and Johannesburg don’t go out.

middleBurg / 25° 54' S, 29° 14' e gOOd cOllaBOratiOn

45



Less than two years after founding its South African subsidiary, TÜV SÜD already has a workforce of 280, and aims to generate revenue of more than one hundred million rand – some € 10 million – for 2012. The company offers its customers services from all of TÜV SÜD’s strategic business segments.

This is a success story, emphasizes Norman van Oudtshoorn. Born in South Africa, he has worked in various international positions at TÜV SÜD for more than 15 years, and regards his company’s commitment in South Africa as a blueprint for developing new markets. The strategy: TÜV SÜD cooperates with successful local partners that have been in business for several years. The South African companies bring excellent contacts and in-depth knowledge of the local market to the table. Meanwhile, TÜV SÜD contributes its global network, plus the expertise and experience of more than 17,000 colleagues. »Our goal is to grow together – in South Africa and on the continent as a whole,« says van Oudtshoorn.

tHe SignS pOint tO grOWtH

It wasn’t just Braam Botha’s employers that were persuaded by this point of view. WAC Projects from Cape Town and Johannesburg, the South African market leader in elevator testing, recently joined the TÜV SÜD Group. TÜV SÜD is also active in the area of vehicle testing. In 2010, the company acquired shares in AVTS Roadworthy Stations, the largest independent provider of vehicle testing in the Western Cape province. The seven branches around Cape Town have a regional market share of more than 20 percent. In coming years, it is planned to increase market share in the Western Cape province considerably.

»Our goal is to grow together – in South Africa and

on the continent as a whole.«

TÜV SÜD’s commitment in the field of vehicle testing is a topic close to the hearts of Norman van Oudtshoorn and his colleagues: every year, more than 15,000 people die in car or motorcycle accidents on South Africa’s roads. In relation to the number of vehicles, this is almost 20 times the number of fatalities in Germany. The dedication of TÜV SÜD’s employees could contribute to increasing safety on South Africa’s roads. After all, for almost 150 years, the company’s mission has been »protecting people, the environment and property from the negative effects of technology« – and that applies equally in Europe, Asia and Africa.

heaDlight CheCK

left: aVtS is the market leader in the Western cape province. the company operates six service stations in and around the provincial capital cape town.

a lanDMarK on the Cape

above: the new soccer stadium in cape town, one of the venues for the 2010 fifa World cup™, is among the city’s most striking landmarks.

47


cApE Town / 33° 55' SouTh, 18° 25' EAST

48

ManageMent and SuperviSory Board i CloSe-up i group ManageMent report i ConSolidated FinanCial StateMentS1 2 3 4

Content

Page 50

Business oper ations

Page 58

MacroeconoMic developMent and

developMents in relevant Markets

Page 63

Business review and

econoMic situation

Page 66

net assets, financial position

and results of oper ations

Page 82

non-financial

perforMance indicators

Page 93

risk report

Page 100

suBsequent events

Page 100

foundation

Page 101

opportunities and outlook

Chapter 3Group Management Report

Content

Page 50

Business oper ations

Page 58

MacroeconoMic developMent and

developMents in relevant Markets

Page 63

Business review and

econoMic situation

Page 66

net assets, financial position

and results of oper ations

Page 82

non-financial

perforMance indicators

Page 93

risk report

Page 100

suBsequent events

Page 100

foundation

Page 101

opportunities and outlook

TÜV SÜD is a global technical services provider. We bring together people, technology and the

environment – with a long-term perspective, in a sustainable manner and adding value. This is the

standard that shapes our work today, just as it has done since our company was founded almost

150 years ago.

Our range of services covers consulting, testing, certification and training. More than 17,000 employees

at more than 600 locations on five continents increase safety and add economic value for our custom-

ers. As dedicated and responsible specialists with wide-ranging industry expertise, we develop

made-to-measure solutions – for retail customers as well as for industry, trade and government. As

consultants, we optimize technology, systems and know-how, while focusing on the entire value

added chain. We always strive to maximize added value for our customers and take an international,

interdisciplinary and cross-industry approach to our work. The result is an end-to-end, one-stop

portfolio that gives our customers major benefits in terms of added value and increased efficiency.

TÜV SÜD today operates in some 50 countries around the world. We are systematically expanding our

international presence in order to get even closer to our customers. At the same time, we are laying

the foundation for the Group’s continued profitable growth, enabling us to be not only a reliable partner,

but also a strong one.

In our globally networked competence centers, we are today making the very latest knowledge

available to our customers across national borders. In this way, we are actively shaping the future in

fields such as electromobility, the new energy concept and global value added chains. In 2011, we took

the next logical step in this development with an innovation project focusing on embedded systems.

Our three strategic business segments – INDUSTRY, MOBILITY and CERTIFICATION – combine sound

specialist knowledge and industry expertise. Each strategic business segment is headed up by a member

of the Board of Management.

The OTHER business segment was finally wound up on July 1, 2011 when TÜV SÜD Life Services was

assigned to the MOBILITY strategic business segment. Prior to this, TÜV SÜD Life Science, which was

also presented under the OTHER business segment, was sold to the Italian CROM group at the start of

the second quarter.

We have prepared the consolidated financial statements for 2011 on the basis of this structure.

Regional stRuctuRe – moRe than 600 locations woRldwideTÜV SÜD has branches all over the world. As of August 1, 2011, we restructured our business in Asia:

instead of the previous ASIA PACIFIC region, five regions are now responsible for business activities

in the area. This change reflects the increased significance of our business activities in Asia and is

intended to enable the regions to make even greater use of existing growth potential in the area.

< >

see the innovation report

Figure F 05

tÜV sÜd structure

Business opeRations

50


In addition to our home market of Germany, we have pooled our activities in nine regions:

– WESTERN EUROPE comprises the UK, France and the Benelux states, Spain, as well as

Switzerland, Austria, Italy and Scandinavia. The region is managed from Munich, Germany.

– CENTRAL & EASTERN EUROPE unites the remaining European states, including Russia and

Turkey. This region is headquartered in Prague, Czech Republic.

F 05 TÜV SÜD STruCTure

664 (600)

5,943 (5,474)

services for the safe, reliable operation and optimization of industrial plant, build-ings and infrastructure facilities.

services for the planning, construction, operation and dismantling of plant and facilities, refineries and power plants.

services for retail customers at more than 300 services centers – from driver’s license tests, roadworthiness tests and exhaust-gas analyses, to appraisals for obtaining classic car registration.

services for corporate customers: used car processes, vehicle fleet management and testing of quality standards at car dealerships.

services across the entire supply chain for product market readiness: from simple toys to complex pharmaceuticals, from domestic appliances through to tools or machines.

infrastructure services and services for the real estate sector as well as for customers from industry and commerce in the areas of structural engineering, materials handling, electrical engineering and real estate valuation.

optimization of products and processes for the automobile industry: support with the development and testing of new models and vehicle components, type approval in accordance with international regulations, consulting on safety issues.

certification of quality, eco and safety management systems for all industries throughout the world.

inspection, homologation, consulting and authorization management for rail vehicles, signaling technology, technical equipment and rail infrastructure with regard to functionality and safety.

driving suitability tests for private individuals.

advice and assistance in all fields of occupational health and safety, this division helps its customers establish complex corporate health management solutions.

education and training in the fields of technology and management.

certification and training of persons.

industRY

industRY seRVices auto seRVices pRoduct seRVices

Real estate seRVices automotiVe management seRVices

Rail life seRVices academY

593 (551)

4,889 (4,706)

moBilitY

tÜV sÜd

418 (399)

4,211 (3,832)

ceRtification

Revenue in € million 2011 (2010)

headcounts 2011 (2010)

divisions

strategic business segment

51


– MIDDLE EAST/AFRICA comprises the African continent and the Arabian Peninsula. Since March

2012, headquarters for this region have been in Abu Dhabi, United Arab Emirates.

– AMERICAS covers the two Americas, from Canada to the southern tip of South America. The

headquarters of this region are in Boston, USA.

– ASEAN comprises the states of Singapore, Indonesia, Malaysia, Thailand, the Philippines and

Vietnam. The region is managed from Singapore.

– GREATER CHINA comprises the People’s Republic of China (including Hong Kong) as well as

Taiwan. The region is managed from Shanghai, China.

– JAPAN, with registered offices in Tokyo, Japan, is responsible for local activities on the Japanese

islands.

– KOREA is managed from Seoul, South Korea.

– SOUTH ASIA unites the national subsidiaries in India, Sri Lanka and Bangladesh. The region is

managed from Mumbai, India.

An overview of the regional structure is provided on p. 10 of this annual report. For the sake of clarity,

the regions ASEAN, GREATER CHINA, JAPAN, KOREA and SOUTH ASIA will be grouped together as

the ASIA PACIFIC region in the remainder of this annual report. As a result, the financial information is

comparable with that for the prior year.

efficient seRVice oRganization foR finance and accounting as well as pRocuRementIn order to harmonize processes in finance and accounting as well as in procurement, the actual

processes in Germany were recorded and analyzed during the reporting period. On this basis, we

have developed standardized target processes, taking into consideration strict segregation of duties,

in order to meet the requirements arising from our internal control system and corporate compliance.

By implementing the target processes, we expect to optimize quality and operations, thereby

enhancing the efficiency of our business processes.

Harmonizing business processes across different divisions and entities also enables future acquisitions

to be integrated rapidly and smoothly. We will also establish the defined target processes at international

level within the company.

The existing shared service centers for accounting and procurement for the various entities in Germany

will be combined in TÜV SÜD Administration Services GmbH, Munich, as of 2012. The same approach

is being implemented for the UK.

< >

see page 10

52


legal stRuctuRe guaRantees independenceTÜV SÜD stands for independence and impartiality. This is ensured by the unique legal structure of

the Group. In its capacity as management holding company, the parent company, TÜV SÜD AG with

registered offices in Munich, manages its subsidiaries around the world through the divisions and

regions. The beneficial owners of TÜV SÜD shares are TÜV SÜD e.V., Munich, and the TÜV SÜD

Foundation, Munich. Both have transferred their shares in TÜV SÜD AG, Munich, to the independent

TÜV SÜD Gesellschafterausschuss GbR, a shareholder committee with registered offices in Munich.

The purpose of this civil law association is to hold and manage this shareholding under stock

corporation law.

Figure F 06

legal structure

stRategY: masteRing change – and leVeRaging associated oppoRtunitiesOur strategy is directed toward growth, globalization and a constant increase in the value of the

company. Thanks to consistently applied measures, we have succeeded in growing profitably in

recent years. We intend to continue this trajectory. We have already invested heavily in developing

the company – and will continue to do so. Our aim is to further increase our growth rate. And the

market offers good conditions for doing this.

F 06 LegAL STruCTure

74,9%

tÜV sÜd e.V.

25,1%

tÜV sÜd foundation

100%

gesellschafteRausschuss gBR

tÜV sÜd ag

geRmanY

ameRicas

westeRn euRope

centRal & easteRn euRope

asean

Japan

south asia

gReateR china

KoRea

middle east/afRica

industRY | moBilitY | ceRtification

one or more subsidiaries in

∆

∆

∆

∆

strategic business segment

53


TÜV SÜD operates in the attractive global TIC market (testing, inspection, certification). This market

is characterized by continuous change, which therefore also shapes our activities. Technological

progress, increasing globalization of the economy, ever more complex products and systems, and ever

shorter innovation and product life cycles – all of these factors constantly pose new challenges for our

company. At the same time, they continually give rise to new opportunities for business and growth.

Increased demand for our services is also fueled by consumers’ and legislators’ demands for higher

standards of quality and safety – both as regards individual products and the processes used to

produce them.

The safety and manageability of technical products, as well as trust in the quality of management

processes, are key to our customers’ success. Our customers are facing ever greater challenges: not

only do they have to be aware of and comply with requirements relating to the safety and quality of

technologies, products and processes. They also have to accurately demonstrate and document their

compliance with these requirements.

In light of this, many companies are now engaging external service providers like TÜV SÜD to handle

these tasks. In order to keep the number of their service providers manageable, they systematically

seek providers that cover the entire value added process as process partners. Moreover, companies

that operate on the international stage want a partner that is not only familiar with the distinctive

characteristics of individual countries, but that can also support globalization efforts via its own global

presence. TÜV SÜD is well equipped for these challenges and ideally positioned in the competitive

environment.

Growth and added value as Goals

We add economic value for our customers. To this end, we systematically invest in our skills and our

expertise. We strive to achieve a leading market position in each of our fields of activity – and have

already achieved this target in many of our core markets. Through systematic globalization of our

activities and strategic innovation management, we are also establishing ourselves as a strong provider

of technical services in new markets. At the same time, we maintain our neutrality and independence.

F 07 Key SuCCeSS FACTorS To mAKe TÜV SÜD FiT For The FuTure

tÜV sÜd ag

cultuRal deVelopment

optimize the poRtfolio

incRease inteRnationalization

BetteR leVeRage potential foR efficiencies

potential-oRiented goals

pRoactiVe m&a

enhance hR management

dRiVe innoVation

change management, customer focus, culture of innovation

divisions, markets, products, subsidiaries

focus on asia Best practices, shared service centers

market and competition

highly effective process wind, photovoltaic, embedded systems, electromobility

54


We initiated the TÜV SÜD FIT 2012+ optimization and efficiency enhancement program back in 2010.

The cornerstones of the program relate to enhancing efficiency and reducing costs, streamlining

product and entity portfolios, and further standardizing administrative processes. These aspects are

intended to support our growth trajectory.

To date, we have generated sales proceeds of € 35.5 million from portfolio streamlining through the

sale of entities within the scope of TÜV SÜD FIT 2012+. A total of 22 entities were sold, merged or

liquidated.

Corporate manaGement – the aim is to add value Continuously

When it comes to managing the company, we act in accordance with the requirements placed on

publicly traded companies by the German Corporate Governance Code. Our aim is to manage

TÜV SÜD according to these standards. Our management system chiefly consists of an integrated

controlling system, the corporate governance system in its various forms, and the risk management

system.

Our integrated controlling system is aimed at safeguarding existing assets, continuously increasing

the value added of the TÜV SÜD Group and promoting development of earnings benchmarked against

the competition. It is based on a group-wide management information system and harmonized global

accounting in accordance with IFRSs. The focus is on financial targets and performance indicators:

we want to continuously increase revenue and earnings, and optimize capital employed.

We have included another value-based indicator adapted to the requirements TÜV SÜD – economic

value added (EVA®) – in our integrated controlling system since last year. This indicator measures the

value added by the Group in different periods; it integrates all the relevant key figures and shows the

dependencies between earnings and the cost of capital used to generate this income.

Value-based corporate leadership will be established in all core management processes, including the

remuneration systems and boards within TÜV SÜD in the medium term, in order to further strengthen

value orientation within the Group.

The EVA concept shows the value added by an entity, a project or capital expenditure or business

combinations in a particular period. To determine EVA, we compare the net operating profit after tax

(NOPAT) with the associated cost of capital.

We calculate the Group’s cost of capital as the product of average capital employed and the weighted

average cost of capital (WACC), which we derive from capital market data. We define capital employed

as non-current operating assets as well as inventories and receivables, less selected non-interest-

bearing liabilities.

Figure F 07

Key success factors to make tÜV sÜd fit for the future

55


We calculate NOPAT from EBIT additionally adjusted for impairment of goodwill and after deducting

income tax. We take income tax into account using an average rate of 30%.

We define EBIT as earnings before interest, before currency translation gains/losses from financing

measures and before income tax, but after income from participations. In contrast to the prior year,

the EBIT definition in the fiscal year no longer includes currency translation gains/losses from

financing measures.

Figure F 08

eBit 2010/2011

With the help of EVA, we measure the sustainable increase in the value of the company, make value-

adding decisions, promote profitable growth and determine the extent to which we have achieved

our growth targets. Accordingly, we measure our acquisition and capital expenditure projects with

this indicator and use it to calculate their specific contribution to value added for our company.

In the fiscal year, the TÜV SÜD Group generated markedly positive economic value added, which was

significantly higher than the prior-year figure. All the strategic business segments contributed to this

positive figure with their business development.

The aim of TÜV SÜD’s corporate governance system is to ensure corporate governance and control

that is responsible, transparent and aimed at adding value. In this connection, we set ourselves high

standards – comparable to those on which we base our business operations of testing and certification

for our customers. More information on the corporate governance system can be found in the

corporate governance report.

Our risk management system is a fundamental component of our control system and is part of the

regulatory framework for management and supervision. It enables us to identify and evaluate risks

at an early stage, allowing us to implement appropriate controls and take preventive measures or

countermeasures, and apply safety precautions. For more details on risk management, please refer

to the risk report.

< >

see the corporate governance report

< >

see the risk report

€ 142.1 million

€ 142.8 million

€ 159.9 million

eBit 2010 – not adJusted

eBit 2010 – adJusted

eBit 2011

F 08 eBiT 2010/2011

56


The financial reporting internal control system (ICS) comprises principles, procedures and measures

aimed at making sure that group financial reporting is compliant. It is intended to ensure the reliability

of financial reporting and, in particular, the correct preparation of the published financial statements.

We had estimated the effectiveness of some controls applicable for the entire consolidated financial

statements in the prior year. In addition to group-wide controls, we also monitored the effectiveness of

the financial reporting ICS for the entities based in Germany in 2011 from a risk-oriented perspective.

To this end, the key controls considered to be material were identified and control activities for standard-

ized execution were documented in control descriptions and rolled out. The effectiveness assessment

is performed on the basis of a self-assessment by the control owner, which is verified on a sample

basis by an internal third-party audit. As we did not determine any significant control weaknesses, the

financial reporting controls are effective.

We will continue to monitor the effectiveness of financial reporting ICS using a standardized procedure

that will be deployed at all locations in the course of the international rollout of harmonized business

processes.

We are constantly working on evolving our integrated corporate management system. We adapt it

to changes within the company and in the company’s environment, as well as to amended legal

provisions and national and international standards. In addition, we perform regular benchmarking.

57


macRoeconomic deVelopment and deVelopments in ReleVant maRKets

macRoeconomic deVelopmentThe global economy was characterized by uncertainty and varied regional development in 2011. Although

global economic output was up by 3.8% on the prior year, the growth rate slowed down considerably

from the middle of the year. This development was seen in virtually all regions, particularly in the

emerging markets.

The situation on the global financial markets was characterized by uncertainty, lack of confidence and

correspondingly high volatility. Due to the weak economic climate, at the end of the year the European

Central Bank reversed the interest rate increases decided at the beginning of the year. As a result, the

key interest rate was again at the record low of 1.0% in December 2011.

Figure F 09

economic growth

reCovery in europe

After a dynamic start, the economic climate in the euro zone became increasingly gloomy. Significant

budgetary difficulties and the high public debt of some EU member states adversely affected economic

development. The status of the euro as the key currency was called into question.

In this environment, the individual economies demonstrated varying degrees of resilience. While

Greece, Spain, Portugal and Ireland have to contend with high unemployment and a sharp decline in

private consumption, Germany proved to be relatively robust. Germany – TÜV SÜD’s core market –

again saw an above-average year-on-year increase in economic output of 3.0%. Strong export activity

once more formed the basis for this development.

F 09 eCoNomiC groWTh iN Key mArKeTS WorLDWiDe (%)

+

0%

–

3.03.6

germany

1.51.7

euro zone

10.09.2

china

9.8

7.4

india

1.72.8

usa

3.84.8

world asia(without Japan)

9.3

7.9

20112010

58


moderate Growth in the usa

In contrast to the weak development worldwide, the US economy picked up in the second half of the

year. At 1.7%, however, US economic growth in 2011 remained merely moderate. The tense situation

concerning the public budget led to the USA’s credit rating being downgraded in the course of the

year. This had a sustained negative impact on the financial markets and the general economic climate.

upswinG Continues in asian emerGinG Countries

In 2011, the emerging economies in south and east Asia were once again the growth drivers of the

global economy, albeit at a slower pace than in prior years.

In China, the region’s largest economy, for example, economic development slowed down, particularly

in the second half of the year. However, year-on-year growth remained significant at 9.2%. In India, the

pace of economic development slackened in the course of 2011. With economic growth of 7.4% in

2011, however, development of the subcontinent’s economy was above average from an international

perspective.

exChanGe rates hiGhly volatile

The currency markets continued to be characterized by high volatility in 2011. Interest focused above

all on the US dollar exchange rate: after reaching its highest level in May (USD 1.48 per euro), the

exchange rate of the single European currency was markedly weaker in the further course of the year.

At year-end 2011, the exchange rate was € 1.29 per US dollar.

The euro also fell slightly in value compared to the pound sterling in the course of 2011.

The value of the Singapore dollar against the European key currency increased by 2.2% after the euro

had been considerably stronger in the course of the year.

The Turkish lira, by contrast, lost 18.1% in value for the year as a whole, and was trading at TRY 2.44

per euro at the end of the year.

deVelopments in ReleVant maRKetsWe offer our services – the testing and certification of products, industrial plant and systems, as well

as consulting and training – in an international market environment. Demand for our services comes

from economically strong, export-dependent countries, particularly in Europe and Asia, but also in the

Americas. New sales markets for our services are also appearing in many emerging and developing

countries. These markets are highly diverse and shaped by their disparate business environments and

regional developments. The following factors are particularly significant:

59


– Globalization: The elimination of trade and customs barriers is giving companies access to new

markets. The relocation of activities to countries that offer competitive advantages is opening up

additional opportunities. At the same time, international trade is growing strongly. Companies

want and need to provide evidence that they meet international standards, particularly in emerging

and developing economies. The corresponding certificates help them to document the safety and

quality of their work. Against this background, it is becoming ever clearer that our customers with

global activities are increasingly seeking a partner who likewise has a global presence and can

offer one-stop, end-to-end services.

– Liberalization: The trends toward liberalization and deregulation are creating new opportunities

for us. At the same time, removing market barriers also intensifies competition and puts greater

pressure on prices in our business.

– Outsourcing: Companies around the world are making use of the opportunity to outsource services

that do not belong to their core competencies, thereby making their cost structures more efficient.

– Technological development: Our times are characterized by increasing technological development.

But business and society at large will only accept and apply new technologies if they are considered

safe, environmentally friendly and manageable.

– Demographic change: Age structures are changing all over the world. This entails risks, especially

in countries with an aging population. In those countries, TÜV SÜD will also increasingly encounter

difficulties in recruiting suitable employees. On the other hand, opportunities arise for our company

wherever the changed age distribution raises demand for our services.

– Increasing consolidation of markets: The consolidation of the market for technical services will

continue. TÜV SÜD will leverage its economic strength to secure its future in the long term by

making targeted investments.

influence of macRoeconomic deVelopment and maRKet chaRacteRistics on ouR BusinessThe effect of macroeconomic development and market characteristics on our business activities

varied from segment to segment and region to region in 2011.

The recovery in order intake following the economic collapse in 2009 had largely been completed by

spring 2011. Otherwise, the development of the global economy in 2011 was slowed down not least by

the natural disaster and reactor catastrophe in Japan and the European sovereign debt crisis. In

60


Germany, the Fukushima effect led to a rethink of the phasing-out of nuclear power. The early

shutdown of older types of nuclear power plant adversely affects our business development in the

German market. By contrast, the European sovereign debt crisis has not impacted our core market

of Germany, where orders are developing positively. Our order situation is also stable in the peripheral

states of the euro zone.

In order to provide our customers around the globe with local contacts, we are continuing to invest in

growth markets, including through business combinations. This year, we focused our expansion strategy

particularly on South Africa, where we are systematically extending our core competencies in road

safety, energy technology and energy efficiency. We see long-term growth potential in these areas,

including in the field of renewable energies. In view of the global increase in the price of crude oil,

renewable energies are of key importance for future energy supply.

The development of our business is supported worldwide by the increasing mobilization of the global

community. In the long term, there will be an above-average rise in vehicle density in the developing

and emerging markets (OECD: 403% by 2030). These countries are also increasingly starting to

introduce vehicle safety standards. The market for our vehicle inspection expertise is growing. Our

presence in the MOBILITY strategic business segment in India, for example, increased with the

opening of our first service station in the country.

Electromobility is one way of meeting individuals’ increasing need for mobility in an environmentally

compatible manner. Here we are systematically stepping up our activities in the area of battery

testing. A worldwide network of battery test labs is currently being set up. The topic of electromobility

is also highly relevant to the German market. Rising commodity prices and the federal government’s

stated goal of having around one million electric vehicles on Germany’s streets by 2020 are providing

positive impetus. This offers us the opportunity of specifying benchmarks and standards in our home

market for a future lead market with global prospects.

The changeover to an urbanized society can already be observed in the conurbations of Asia and

South America. Infrastructure projects designed to shape local public transport, such as the metro in

Mecca, where we were appraisers for the entire system, will become increasingly important. We will

leverage our experience in the field of rail systems and technology to successfully position ourselves

in this area. In this connection, greater importance will also be given to sustainable design of

buildings and public areas. Here, energy efficiency, building technology and safety, the use of renew-

able materials, and building climate are core issues to which we will contribute through our service

portfolio. We further enhanced our expertise in this field by acquiring global player Wallace Whittle

Holdings Ltd., Glasgow, during the year.

61


In addition to supporting the sparing use of energy, we consider our market to be in renewable

energies. Here we mainly operate in the areas of photovoltaic and wind power. Asia, and in particular

China, is an attractive growth market for our services relating to wind power. China is already one

of the largest wind power markets and is the world’s leading manufacturer of wind turbines. In light of

this, we entered into a strategic alliance with the China Electric Power Research Institute (CEPRI)

during the fiscal year in order to jointly test prototypes and perform inspections and training measures

in the area of wind power. Our largest photovoltaic project is currently in progress in India, where

we have been tasked with quality assurance from planning through to implementation of a photovoltaic

power plant in Shivajinagar, Maharashtra.

The uneven development of the global economy is also reflected in our regions. Germany demonstrated

robust development. In WESTERN EUROPE, we are mainly represented in countries that are affected

only slightly by the euro debt crisis, if at all. In CENTRAL & EASTERN EUROPE, the tense economic

situation in the Czech Republic impacted the development of our business. We immediately countered

this by implementing cost-saving measures. Business development in the AMERICAS was stable,

following positive impetus in the prior year through our acquisition of global player Global Risk Consultants

Corp., Wilmington, (the GRC group). In ASIA PACIFIC, the moderate economic upswing supported

our business. However, our focus on advanced training business meant that we had to accept losses

as we sold our school education activities. We benefit from our broad service portfolio, which ranges

from food safety to advanced training through to renewable and conventional energy, and also covers

the requirements of the internal market.

62


Business ReView and economic situation

In 2011, we continued the strategic realignment of the Group’s organizational structures. As part of the

TÜV SÜD FIT 2012+ program, we streamlined our service portfolio. This gave us scope to systematically

invest in the strategic growth areas and thus press on with our international expansion.

Thanks to our international presence and high-quality service portfolio, we remained successful in

2011 despite the disparate development of the global economy.

focused appRoach cReates scope foR actionWith the sale of the Msource group in April 2011, we successfully took the first step in focusing our

service portfolio. In the further course of the fiscal year, we systematically pursued this consolidation

strategy.

For example, in June, we sold PSB Academy Pte. Ltd., Singapore (PSB Academy), whose activities

focus on training and university education. At the same time, we sold our participation in James Cook

Australia Institute of Higher Learning Pte. Ltd., Singapore (JCU). The company mainly operates a

private school in Singapore. This streamlining has enabled us to focus our management capacity more

firmly on developing our basic and further training offering in the field of personnel certification and

on the open seminar business of the CERTIFICATION strategic business segment.

In June 2011, we also sold our shares in PSB Technologies Pte. Ltd., Singapore (PSB Technologies).

In the MOBILITY strategic business segment, we sold our share in e4t transportation for electronics

s.r.o., Prague (e4t), in October 2011. In September 2011, we sold our participation in Hannover Leasing

Automotive GmbH, Pullach (HLA), to co-shareholder Hannover Leasing GmbH & Co. KG. Still in

September 2011, we also sold the crash test system of TÜV SÜD Czech s.r.o., Prague.

acquisitions in the moBilitY stRategic Business segmentWe continued our international expansion with a clear focus on our strategic growth areas.

The acquisition of CGP Christof Gerhard & Partner, Olpe (CGP), in January 2011 extends our service

offering for car dealerships and workshops in the field of international used car strategy. We now

offer our major customers in the dealership and workshop sector a comprehensive range of services

in line with international standards – from used car management through to registration service.

In May 2011, we acquired an investment in Fleet Logistics International NV, Vilvoorde (Fleet Logistics

group), as well as 100% of the shares in the German subsidiary Fleet Logistics Deutschland GmbH,

Mainz (FLD). This strategic investment makes us the European market leader in independent fleet

management. The Fleet Logistics group offers fleet management for leased vehicles at European level,

thus supplementing the service offering of our existing subsidiary FleetCompany GmbH, Oberhaching

(FleetCompany), which offers these services for customers’ own fleets.

Figure F 07

Key success factors to make tÜV sÜd fit for the future

63


Together with partner SIXT AG, we established TÜV SÜD Car Registration Services GmbH, Munich

(CRS). The company offers large-scale fleet operators the entire range of services related to registering

and deregistering vehicles with the German authorities. It is planned to extend the service offering to

retail customers.

In November 2011, we acquired the Italian company Stima System s.r.l., Genoa, as part of an asset

deal. With its close-knit network of test engineers, the company offers comprehensive services for

dealerships, manufacturers and fleets in Italy.

Through targeted acquisitions, the establishment of new companies and integration into an extensive

network of TÜV SÜD entities, we can ensure comprehensive coverage for our major customers and

key accounts in the MOBILITY strategic business segment in Europe and throughout the world.

expansion of actiVities in the ceRtification stRategic Business segmentIn January 2011, we acquired Innovative Testing Solutions Ltd., Newmarket (ITS), in Canada. The

company is an accredited test lab for batteries and electrical products. It performs environmental and

mechanical testing to determine the useful life of these products. ITS is a welcome addition to our

CERTIFICATION strategic business segment’s global network of test facilities for electromobility. As a

result, we are the first independent test and inspection provider to offer customers a comprehensive

international network of battery test labs for electric vehicles.

inteRnational expansion in the industRY stRategic Business segmentFacility management and energy technology were one focus of the business combinations in the

INDUSTRY strategic business segment in the fiscal year 2011.

The acquisition of Wallace Whittle Holdings Ltd., Glasgow, UK (Wallace Whittle), in July 2011 enhances

our range of services by adding sustainability and energy efficiency for the construction industry.

The company, which operates internationally, offers comprehensive consulting services in the field of

cost-effective building technology, and renewable and low-emission energies. The service portfolio

also includes sustainability certification in accordance with internationally recognized standards.

We further increased our investment in South Africa in October 2011 with the acquisition of Pro-Tec

Boiler Inspection & NDT Services (Pty) Ltd., Middelburg (Pro-Tec), the local market leader in non-

destructive testing and inspections for the energy industry. This also enabled us to strengthen our

service offering in the field of energy technology and pursue our internationalization efforts.

64


RestRuctuRing of the stRategic Business segments and RegionsThe TÜV SÜD Life Services division was assigned to the MOBILITY strategic business segment as of

July 1, 2011. With its portfolio of medical/psychological services for vehicle drivers, TÜV SÜD Life

Services ideally complements the MOBILITY strategic business segment’s range of services. At the

same time, the OTHER business segment was finally discontinued following the sale of the Life

Science division.

In terms of geographical organization, we now divide the former ASIA PACIFIC region into five regions:

ASEAN (with Singapore, Indonesia, Malaysia, Thailand, the Philippines and Vietnam), SOUTH ASIA

(with India, Sri Lanka and Bangladesh), GREATER CHINA, JAPAN and KOREA. This reorganization

reflects the continuously increasing significance of these growth regions. For reporting purposes,

however, we will continue to use the ASIA PACIFIC region as a unit in the following.

ReVenue and eaRnings up on the pRioR YeaRTÜV SÜD benefited from the robust economic development in Germany. The stable economy in Asia

and other emerging market in the Middle East and Africa supported development of our company’s

revenue in these regions.

With the revenue generated in 2011, we reached the upper end of the range of our prior-year forecast.

Despite the divestitures in the CERTIFICATION strategic business segment in ASIA PACIFIC, we again

increased international revenue, thus coming closer to our goal of increasing the share of international

revenue to 40%. All strategic business segments saw positive revenue growth, thereby meeting

expectations. Revenue growth in the regions also matched our expectations.

Earnings before interest, currency translation gains/losses from financing measures and income taxes,

but after income from participations increased significantly as expected by 12.0% to € 159.9 million.

At € 133.6 million, consolidated income before taxes was up 8.3% on the prior-year figure and exceeded

the 5% increase in earnings expected in the last management report.

Income before taxes in 2011 was again positively influenced by one-off effects. These are attributable

in particular to the strategic divestitures aimed at streamlining our service portfolio in the ASIA PACIFIC

region. Opposite effects resulted from impairment losses on our shares in the Spanish ATISAE Asistencia

Técnica Industrial S.A.E, Tres Cantos (ATISAE group), and the currency translation gains/losses from

financing measures.

65


net assets, financial position and Results of opeRations

Results of opeRationsWe increased our revenue by € 125.2 million or 8.1% to € 1,677.7 million in fiscal year 2011. Organic

growth in the existing service business accounted for revenue growth of € 148.3 million. The revenue

rise from organic growth, including currency effects, was 9.1% (prior year: 7.9%). Adjusted for currency

effects, acquisitions and divestitures, revenue from organic growth increased by 9.6%. Additions to

the scope of consolidation from previously held entities contributed € 12.4 million to organic growth.

Exchange rate effects reduced consolidated revenue by € 8.1 million or 0.5%. Adjusted for exchange

rate effects, revenue growth totaled 8.6%. By contrast, business combinations and divestitures

of consolidated companies resulted in a net revenue decrease of € 15.1 million. Most of this figure

is attributable to the divestitures of PSB Academy and PSB Technologies in Singapore, which led

to revenue losses of € 22.5 million.

Despite portfolio streamlining during the year, we have surpassed our planned organic revenue

growth in the range of 6% to 8%. In Germany, in particular, we recorded positive development of

orders due to the good economic situation.

We generated 45.9% or € 57.5 million (prior year: 24.7%) of the additional revenue in Germany. 54.1%

of additional revenue was generated in other countries (prior year: 75.3%), which translates into a

€ 67.7 million increase in revenue. Despite the portfolio streamlining in other countries, the share of

total revenue generated in other countries increased and now amounts to 34.6% (prior year: 33.0%).

Purchased service cost increased slightly in relation to revenue. The ratio of purchased service cost

to revenue thus increased slightly from 13.3% in the prior year to 13.4%.

Personnel expenses rose by 9.6% in 2011 to € 986.2 million. The ratio of personnel expenses to revenue

rose by 0.8 percentage points from 58.0% in the prior year to 58.8% in 2011.

The expenses for wages and salaries including social security contributions rose by 9.0%. This was

principally attributable to the collective wage increase in Germany and the expansion of the workforce

by hiring new people, business combinations and first time consolidation of previously held entities.

In fiscal year 2011, the retirement benefit costs increased by 17.9% compared to the prior year to

€ 69.8 million. The prior-year figure included a positive one-off effect of € 9.0 million due to the

»Gesetz zum Neuen Dienstrecht in Bayern« [Act on New Public Sector Employment Law in Bavaria],

which led to a positive past service cost when measuring the pension provisions in the prior year.

The increase in other expenses (9.7%) was higher than the change in consolidated revenue. As a

percentage of revenue, other expenses rose slightly by 0.3 percentage points to 19.0% as a result.

66


Higher travel expenses, caused in particular by the further increase in flat mileage rates, as well as

higher costs for rent and building maintenance contributed to this development. In addition, there was

an increase not only in legal and advisory costs, particularly in connection with the divestiture of the

Asian subsidiaries and for projects aimed at increasing efficiency and optimizing processes, but also in

certification costs for the new energy efficiency laboratory of TÜV SÜD America Inc., Danvers, in Peabody.

Other income increased significantly by 81.5% compared to the prior year to € 65.5 million. The gain on

deconsolidation of € 27.5 million of PSB Academy is included here as a significant item.

The financial result decreased by € 16.3 million in the fiscal year 2011 to € –30.1 million (prior year:

€ –13.8 million).

The income from investments accounted for using the equity method came to € 1.5 million (prior year:

€ 6.5 million). This decrease was due in particular to the lower profit contribution made by the Turkish

joint venture companies. Moreover, the lack of income from the Spanish ATISAE group, which has

been reported as a participation at cost since the start of the year, also had an effect.

The income/loss from participations decreased by € 5.9 million to € –4.6 million in a year-on-year

comparison. At € 8.7 million, gains on disposal of participations could not compensate for the write-

downs on participations, in particular on the Spanish ATISAE group of € 12.5 million.

The remaining financial result, comprising net interest expenses and currency translation gains/losses

from financing measures, fell by € 6.9 million to € –26.3 million in the reporting year. Falling interest

income and simultaneously rising interest expenses resulted in a year-on-year decrease of € 4.0 million

in net interest to € –22.7 million. The lower expected return on plan assets, and interest costs from

pension provisions at almost the same level as in the prior year, resulted in an increasing rate of net

finance costs for pension provisions. The expected return on plan assets for 2011 amounted to

€ 40.3 million (expected rate of return: 4.8%). In 2011, as in the prior year, the discount rate for the net

pension expense in Germany was 5.25%.

In the prior year, the higher expected return on plan assets and the expected decreasing discount

rate, which affects the interest cost of pension obligations, had led to lower net finance costs for

pension provisions.

On the other hand, the interest expense for the drawn portion of the syndicated credit line decreased

due to better terms.

The development of the exchange rate between the US dollar and Turkish lira was mainly responsible

for the negative change of € –2.9 million in the currency translation gains/losses from financing

measures to € –3.6 million. This is due to external financing in US dollars at our Turkish subsidiary

TÜV SÜD Bursa Tasit Muayene Istasyonlari Isletim A.S., Osmangazi-Bursa, (TÜV SÜD Bursa).

67


Income before taxes came to € 133.6 million in the fiscal year 2011. This constitutes an increase of

8.3% on the prior year.

Despite the increased income before taxes, the income tax expense decreased by € 8.3 million to

€ 26.9 million. The tax rate in 2011 was 20.1% and therefore significantly lower than the prior-year rate

of 28.5%. In 2011, valuation allowances of € 9.7 million on deferred taxes recognized on tax loss

carryforwards were released as it had become unlikely that these loss carryforwards would be utilized

in the future. Moreover, income before taxes in 2011 was influenced by tax-free gains on disposals that

are only partially offset by tax-neutral write-downs.

Overall positive one-off effects also influenced earnings development in 2011. They totaled € 13.2 million

(prior year: € 11.5 million).

The adjusted one-off effects comprise – taking into account the costs to sell – the gains on disposal

of the fully consolidated entities PSB Academy and PSB Technologies in Singapore, and of the non-

consolidated participation in JCU totaling € 32.6 million. The write-down on the participation in the

Spanish ATISAE group of € 12.5 million was also eliminated here. Finally, the exchange rate effects

from the fluctuations between the US dollar and Turkish lira were eliminated for the financing denomi-

nated in US dollars (€ 6.9 million) during the fiscal year. The adjustment of this effect from the Turkish

joint venture companies influences earnings before interest and taxes (EBIT) through the income from

investments accounted for using the equity method. On the other hand, the adjustment from the

financing of our Turkish subsidiary TÜV SÜD Bursa affects net interest and thus influences only

income before taxes.

In the prior year, the »Gesetz zum Neuen Dienstrecht in Bayern« [Act on New Public Sector Employment

Law in Bavaria] led to a positive one-off effect of € 9.0 million due to the remeasurement of the

pension obligations. Furthermore, the contribution of assets as plan assets to TÜV SÜD Pension Trust

e.V. resulted in a write-up to the higher fair market value with an effect on income (€ 4.2 million).

By contrast, the closure costs recorded for PT PSB Intellis, Jakarta, reduced earnings by a total of

€ 1.7 million, thus reducing the one-off effects, which were positive on the whole.

EBIT, i.e., earnings before interest, currency translation gains/losses from financing measures and

income taxes, but after income from participations increased by 12.0% to € 159.9 million. The EBIT

margin increased by 0.3 percentage points to 9.5%. Adjusted EBIT came to € 143.3 million in the fiscal

year 2011 (prior year: € 131.3 million). The one-off effects had a total impact of € 16.7 million in the

operating result and in the income from investments accounted for using the equity method. The

adjusted EBIT margin remained constant at 8.5% as in the prior year.

Adjusted EBITDA – defined as EBIT before depreciation and amortization – increased slightly by 5.3%

to € 195.6 million (prior year: € 185.9 million).

Adjusted for the aforementioned one-off effects, income before taxes amounted to € 120.4 million

(prior year: € 111.8 million).

68


The return on sales, calculated using earnings before taxes (EBT) increased slightly in the fiscal year.

At 8.0%, it is slightly up on the prior-year figure. The adjusted return on sales (EBT margin), which is

more suited for assessing earnings, is also unchanged compared to the prior year at 7.2%.

Profit/loss from discontinued operations contains the remaining proceeds from the settlement of the

divestiture of the TÜV SÜD Life Science division. In 2010, € –13.6 million had been recognized. In the

prior year, the profit/loss from discontinued operations contained negative effects totaling € 13.9 million

that had to be eliminated. These mainly contained impairment losses on goodwill and on intangible

assets recognized in the course of the purchase price allocation.

This results in overall one-off effects to be eliminated of € –13.2 million (prior year: € +2.3 million). As a

result, the adjusted consolidated net income of € 94.0 million is € 17.0 million (22.1%) higher than the

adjusted prior-year figure of € 77.0 million.

The consolidated net income reported at € 107.2 million is 43.7% higher than the prior-year figure of

€ 74.6 million.

For further analyses of significant items of the consolidated income statement, we refer to notes 7

through 16 of the notes to the consolidated financial statements of TÜV SÜD AG.

financial positionprinCiples of finanCe manaGement/finanCial strateGy

Through our financing activities, we aim to maintain a sound financial profile at all times. At the same

time we want to ensure liquidity reserves are always sufficient to meet TÜV SÜD’s payment obligations.

Further objectives of the corporate treasury function include managing the foreign exchange exposure

effectively and optimizing interest rates on an ongoing basis. Due to the significant volume of assets

set aside to cover pension obligations, the investment and risk management of these positions is of very

great importance for us.

Cash flows from operating activities are the primary source of liquidity.

The available cash and cash equivalents are supplemented by a syndicated credit line of € 200 million,

with a term until mid-2016, to give us the financial flexibility necessary to reach our growth targets.

USD 75 million (€ 54.7 million) of the credit line provided by eight primary banks had been drawn on by

the end of the reporting period. At the end of the second quarter – before the outbreak of the euro

debt crisis –, we used the opportunity to renegotiate the terms of the syndicated loan of € 200 million

with the banks involved. We achieved a further significant reduction in comparison to the credit

margin negotiated in the prior year. The contractually agreed credit line has a term of another five

years; an option, which can be exercised by TÜV SÜD in the first and second year of the term, to

extend the term by one year at a time was also agreed.

< >

see notes to the consolidated

financial statements

69


Together with this credit facility, the available funds and the annual free cash flow, TÜV SÜD has

sufficient liquidity to finance its planned external growth.

TÜV SÜD strives to ensure its credit rating remains in the good investment grade.

Capital expenditures

The volume of capital expenditure excluding financial assets, securities and business combinations,

came to € 64.4 million in the fiscal year (prior year: € 52.2 million).

At € 20.4 million, the most extensive investments were made in the MOBILITY strategic business

segment, mostly for property, in particular service stations and the technology and environmental center

(TUZ) in Pfungstadt in the German state of Hesse. We invested € 16.5 million and € 9.3 million in the

CERTIFICATION and INDUSTRY strategic business segments respectively. While investments were

made in expanding laboratory capacities in the CERTIFICATION strategic business segment, the focus

in the INDUSTRY strategic business segment was on industrial plant. Other investments in the fiscal

year that were not allocated to the strategic business segments included investments in property as

well as hardware and software.

We invested € 44.2 million (68.6%) in our home market of Germany in 2011. The corresponding figures

for the WESTERN EUROPE, CENTRAL & EASTERN EUROPE and MIDDLE EAST/AFRICA regions were

€ 2.3 million, € 0.8 million and € 0.5 million respectively. Our capital expenditure amounted to € 9.8 million

in the ASIA PACIFIC region, with € 6.8 million spent in the AMERICAS region. The investment volume

increased significantly across all regions, with the exception of the CENTRAL & EASTERN EUROPE

region, where we invested less than in the prior year.

As of the end of the reporting period, there were no material outstanding capital commitments.

We invested € 27.3 million in entities and participations in 2011 (prior year: € 80.5 million). These

investments include cash paid for the acquisition of investments in consolidated affiliated companies

and for the acquisition of additional investments in non-consolidated affiliated companies. In the

INDUSTRY strategic business segment, the significant acquisitions in terms of amounts were made in

the WESTERN EUROPE and MIDDLE EAST/AFRICA regions.

liquidity analysis

The liquidity situation improved again in fiscal year 2011 – cash and cash equivalents amounted to

€ 245.3 million and therefore account for 17.2% of total assets (prior year: 13.8%). The development

of cash and cash equivalents in the fiscal year is presented in detail in the consolidated statement

of cash flows on page 109 of the notes to the consolidated financial statements.

Consolidated net income, as the basis for deriving cash flows, was significantly up on the prior-year

level in the fiscal year. Adjusted for gains on disposal of fully consolidated entities and business units

as well as on disposal of financial assets of € –35.9 million, the comparable basis is slightly below the

< >

see page 109

70


prior-year level. The other non-cash reconciliation positions amortization, depreciation, impairment

losses and write-ups were roughly at the prior-year level and include the write-down of the participation

in the ATISAE group in 2011 and in 2010 the impairment loss on goodwill from the acquisition of the

Msource group. The change in non-cash income and expenses mainly results from a write-up with an

effect on income of € 4.2 million for the assets contributed to TÜV SÜD Pension Trust e.V.

As in the prior year, the changes in working capital and the other assets and other liabilities resulted

in a cash inflow. The capital employed in current assets was considerably lower, despite the invoicing

of a large-scale order at the end of the year. By means of receivables management, days sales

outstanding (DSO) were kept constant, although trade receivables increased as a result of the significant

growth in revenue. Cash flow from operating activities increased by € 9.6 million (6.6%) to € 154.6 million.

The cash outflow from investing activities fell by € 64.5 million to € 102.3 million. This fall is essentially

attributable to the significant decrease in cash paid for business combinations compared to the prior

year when the GRC group was acquired. Due to the portfolio measures carried out in 2011, there was

a cash inflow totaling € 13.7 million (prior year: outflow of € 80.5 million) from business combinations

and divestitures less cash acquired or disposed of. This positive effect on the cash flow from investing

activities was partially offset by the increase in cash paid for investments in intangible assets and

property, plant and equipment, not least due to the expansion of worldwide laboratory capacities and

investments in new technologies as well as software solutions. Moreover, net cash receipts from

investments in financial assets decreased by € 15.7 million compared to the comparative period, largely

due to the repayment of € 25.0 million of the loan to TÜV SÜD e.V. in 2010. An amount of € 12.5 million

was invested in non-current securities in the fiscal year; as a result, the portfolio increase was slightly

below the prior-year level of € 15.2 million. Contribution to pension plans was slightly up on the

prior-year value and primarily consists of the contribution of cash to TÜV SÜD Pension Trust e.V. in

return for the reimbursement of pension payments made in advance. The investment income generated

by the pension trust resulted in an increase in plan assets, and accordingly contributed among other

things to a reduction in the existing funding deficit.

The cash outflow from financing activities primarily results from dividend payments and the increase

of the US dollar loan used to finance the earn-out agreement of the GRC group acquired in the prior

year. The loan taken out to finance this acquisition represented the major inflow in the prior year,

which was partially offset by the repayment of the cash pool liability to TÜV Föderation, which is a

loan by nature. Other payments contain payments to non-controlling interests for the acquisition of

their shares as well as earn-out payments made.

Cash and cash equivalents of € 245.3 million – consisting of checks, cash in hand, bank balances and

securities with an original term of less than three months – have therefore again improved considerably.

With the securities disclosed in other financial assets which can be liquidated at all times, there are

available cash and cash equivalents totaling € 327.8 million (prior year: € 260.5 million). Additional

financing flexibility is provided by the credit line still available as of December 31, 2011 in the amount

of € 145.3 million from the syndicated loan agreement.

71


assets, equity and liabilities

Total assets increased to € 1,430.0 million in the fiscal year. This represents a rise of 4.0%.

Assets increased by € 55.5 million. Overall, non-current assets changed only slightly; however, there

were major shifts in their composition. Current assets rose by € 54.6 million. The increase is mainly

attributable to trade receivables (+€ 27.2 million) and cash and cash equivalents (+€ 56.1 million). By

contrast, other receivables and other assets (–€ 18.0 million) and non-current assets and disposal

groups held for sale that include the discontinued operations (–€ 16.2 million) were down.

The rise in intangible assets is chiefly attributable the change in goodwill and the carrying amounts of

trademarks, customer relationships and licenses stemming from business combinations during the year.

Property, plant and equipment increased in particular due to the investments in laboratories for battery

and energy efficiency testing in the AMERICAS region (+€ 1.9 million).

Investments accounted for using the equity method decreased by € 39.2 million. This is mainly attributable

to the change in measurement of the shareholding in the ATISAE group. As of January 1, 2011, the

carrying amount of the ATISAE group of € 36.0 million is carried at cost instead of using the equity

method, as in the prior year, as the TÜV SÜD Group no longer has significant influence over the

management. Furthermore, the profit contributions from our Turkish joint venture affected the level of

investments accounted for using the equity method.

The increase in other financial assets from € 102.5 million to € 123.3 million is also attributable to the

change in the measurement and presentation of the ATISAE group. Following the transfer of the share-

holding, an impairment loss of € 12.5 million on the investment in the ATISAE group was necessary on

account of the expected future business development.

net assetsComposition of the statement of finanCial position of the tÜv sÜd Group

59.9 40.1

34.8 30.9 34.3

non-current assets

non-current liabilities current liabilities equity

current assets

57.6 42.4

25.3 37.737.0

2010

2011

2010

2011

assets

equity and liabilities

F 10 ASSeTS/equiTy AND LiABiLiTieS (%)Figure F 10

assets/equity and liabilities

72


In 2011, trade receivables rose by 10.2% and thus increased slightly more than revenue. The rise was

largely due to expansion of the scope of consolidation through business combinations and to the

invoicing of the large-scale contract in the USA that was completed at the end of the year. The growth

in receivables from the measurement of unbilled work in process of € 7.0 million is likewise influenced

by large-scale projects, particularly those of TÜV SÜD Industry Service, Madagascar S.A., Madagascar,

and Jiangsu TÜV Product Service Ltd., Wuxi, and Kocen Consulting & Services Inc., Seongnam-si.

Before taking into account the receivables measured using the percentage-of-completion method,

trade receivables increased by € 20.2 million or 9.2% in the fiscal year. The days’ sales outstanding in

Germany improved in comparison to the prior year by means of intensive receivables management.

However, this was offset by large-scale contracts in the USA. As a result, the days sales outstanding

was kept constant.

Other receivables and other current assets decreased by € 18.0 million to € 53.1 million. This change

was largely due to the decrease in receivables from cash pooling due from TÜV SÜD e.V.

Following the divestiture of the Life Science division and the disposal of assets of two fully consoli-

dated companies, no significant non-current assets and disposal groups held for sale are presented.

Equity rose by € 67.8 million to € 539.0 million in the fiscal year. The equity ratio climbed by 3.4 percentage

points to 37.7%, thus well above our target ratio of 25%. The equity increase is largely attributable to

the consolidated net income of the reporting year.

On the other hand, actuarial losses from pension obligations and plan assets, after taking into account

deferred taxes, reduced equity by € 25.6 million.

Non-current liabilities increased by € 50.0 million to € 528.9 million. The main effect stemmed from the

non-current financial debt which increased by a total of € 55.2 million. The majority of this amount

(€ 58.0 million) resulted from the reclassification of the partially used syndicated credit line from current

financial debt. This amount was used to finance the GRC group, which was purchased in the prior

year. The non-current liabilities also include the USD 10.0 million (€ 7.3 million) increase of this US dollar

loan used to settle the earn-out obligation from the acquisition of the GRC group.

This was offset by the provisions for pensions and similar obligations, which fell by € 8.1 million or

2.0% to € 386.3 million.

While plan assets increased by € 22.3 million, defined benefit obligations rose by € 14.2 million. The

only slight increase in the amount of the obligations resulted in particular from the fact that the

discount rate used to calculate benefit obligations in Germany remained unchanged compared to the

prior year. Obligations in other countries decreased due to the payment of most of the obligations of

the GRC group, which had been acquired in the prior year, resulting in a reduction of plan assets in the

same amount.

73


Moreover, the development of plan assets is characterized by actuarial losses as the returns actually

generated in fiscal 2011 were significantly lower than the expected average long-term return. The

percentage of pension obligations funded by plan assets (69.2%) increased slightly in comparison to

the prior year (68.2%).

The return on total plan assets in 2011 was below the expected average long-term return for Germany

of 4.8%. This gave rise to actuarial losses of € 19.8 million.

In order to extend the external financing of pension obligations in Germany, TÜV SÜD has transferred

operating assets to TÜV SÜD Pension Trust e.V., established for this purpose, since 2006 as part of a

contractual trust agreement. The funds are administered by this association in a fiduciary capacity,

and serve solely to finance pension obligations. Pursuant to IAS 19, the transferred trust assets of

€ 782.3 million are to be treated as plan assets, and are therefore offset against pension obligations.

As of the reporting date, there are additional plan assets totaling € 86.2 million, essentially from

pension funds in Germany and pension plans in other countries.

In 2011, the capital market was heavily influenced by the events in Fukushima and the debt crisis in

Europe. Investors sought refuge in secure government bonds in particular, leading to a further fall in

returns on German government bonds from the second quarter of 2011, while investors called for high

markups on government bonds of critical euro zone countries. In the stock market, many indices also

suffered the effects of the European debt crisis. Both the leading share index in Germany DAX and the

broader EuroStoxx index lost around 15% in 2011.

The effects of the European debt crisis have not adversely affected the substance of the plan assets.

A return of 1.9% (€ +13.1 million) was generated by the Oktagon fund in the fiscal year.

For a detailed presentation of the development of pension obligations and plan assets, please refer to

Note 30 in the notes to the consolidated financial statements.

Current liabilities decreased by € 62.4 million to € 362.0 million. The main reason for this was the changed

presentation of an amount of € 58.0 million from the syndicated credit line. Other current liabilities

decreased by € 5.8 million, mainly due to the payment of the contractual earn-out obligations from

prior-year business combinations.

overview: development of strateGiC business seGments and reGions

In 2011, we again increased revenue in all three strategic business segments. Our home market of

Germany in particular and almost all regions, with the sole exception of CENTRAL & EASTERN

EUROPE, recorded positive revenue growth. This enabled us to perform well worldwide in a difficult

economic environment.

Figure F 11

Revenue by strategic business segment 2010/2011 (%)

74


The TÜV SÜD Life Services division was assigned to the MOBILITY strategic business segment. The

prior-year figures have been restated accordingly. Within the CERTIFICATION strategic business

segment, Food was also reclassified from the Management Services division to the Product Services

division and the prior-year figures were restated accordingly. The OTHER business segment was

wound up after the final disposal of the Life Science division and transfer of the TÜV SÜD Life Services

division to the MOBILITY strategic business segment.

In 2011, the INDUSTRY strategic business segment again made the largest contribution to the Group’s

revenue growth. The strategic business segment’s revenue increased by a nominal amount of € 64.7 million

or 10.8% compared to the prior year. TÜV SÜD Industry Services is the division of the INDUSTRY strategic

business segment with the highest volume of revenue, accounting for 70.7% of revenue. The TÜV SÜD

Real Estate Services division achieved a revenue contribution of 23.6%. The acquisition in the UK during

the year accounted for a significant portion of this figure. The highest growth rate was again recorded

by the TÜV SÜD Rail division (28.1%).

The 5,707 employees (on average) in the INDUSTRY strategic business segment generated revenue of

€ 664.4 million and accounted for 39.6% of TÜV SÜD’s consolidated revenue.

The MOBILITY strategic business segment achieved revenue growth of € 41.6 million (+7.5%) thereby

contributing significantly to the revenue growth of the Group. The most significant contribution was from

the TÜV SÜD Auto Services division, which saw an increase of € 39.2 million. As a result, this division

has the highest volume of revenue within the MOBILITY strategic business segment (82.8%). The TÜV SÜD

Automotive division generated 8.4% of revenue. The TÜV SÜD Life Services division, which was reassigned

to the MOBILITY strategic business segment, saw a slight decrease in revenue of -2.4%. Nevertheless, it

contributed 8.8% to the total revenue of this strategic business segment.

The 4,818 employees (on average) of the MOBILITY strategic business segment generated 35.4% or

€ 593.1 million of TÜV SÜD’s total revenue.

ceRtification 24.9 ceRtification 25.7

industRY 39.6

industRY 38.6

moBilitY 35.4moBilitY 35.6

otheR 0.1 otheR 0.1

20112010

F 11 reVeNue By STrATegiC BuSiNeSS SegmeNT 2010/2011 (%)

75


The revenue of the CERTIFICATION strategic business segment amounted to € 18.7 million (+4.7%) and

developed less than expected compared to the prior years. At 24.9%, the contribution to consolidated

revenue was below the prior-year figure of 25.7%. The main reasons for this were the strategic divestitures

of companies in the ASIA PACIFIC region. The TÜV SÜD Product Services division had the highest

revenue growth (+8.8%) and also contributed most to the revenue of the CERTIFICATION strategic business

segment (59.1%). The TÜV SÜD Management Services division contributed 7.6% to the positive revenue

development. The TÜV SÜD Academy division is significantly affected by the divestiture of PSB Academy

in Singapore. The division suffered a 13.4% decrease in revenue compared to the prior year and contributed

only 14.2% to the total revenue of the strategic business segment.

The 4,114 employees (on average) of the CERTIFICATION strategic business segment generated

revenue of € 417.8 million.

We recorded 65.4% of consolidated revenue in our home market of Germany with 9,178 employees

(on average) here.

In the WESTERN EUROPE region, we raised revenue by 8.8%. The 821 employees there generated

revenue of € 151.5 million.

We saw a slight decrease in revenue of 0.7% in the CENTRAL & EASTERN EUROPE region. The main

reasons for this were the divestiture of the Czech entity e4t, the sale of the crash-test laboratory, and

the difficult overall economic situation in the Czech Republic. The 815 employees (on average)

generated revenue of € 58.6 million.

Despite the strategic divestitures, the ASIA PACIFIC region recorded 9.3% revenue growth, once again

increasing its share in the total consolidated revenue. At 12.7%, the ASIA PACIFIC region made the

highest revenue contribution, after Germany. The 3,972 employees (on average) generated total revenue

of € 212.5 million.

The AMERICAS regions increased its share in total revenue to 8.2%. The 25.3% jump in revenue

was thanks first and foremost to the GRC group, which was consolidated for the first full fiscal year.

The 1,006 employees (on average) in this region generated revenue of € 138.0 million.

Figure F 12

Revenue by region 2010/2011 (%)

asia pacific 12.5 asia pacific 12.7geRmanY 67.0 geRmanY 65.4

westeRn euRope 9.0 westeRn euRope 9.0

ameRicas 7.1 ameRicas 8.2

centRal & easteRn euRope 3.8

centRal & easteRn euRope 3.5

middle east/afRica 0.6 middle east/afRica 1.2

2010 2011

F 12 reVeNue By regioN 2010/2011 (%)

76


Our smallest region, MIDDLE EAST/AFRICA, demonstrated its importance as a growth market with

revenue growth of 100.0%, albeit on the basis of a very low prior-year figure. The marked increase in

revenue primarily resulted from the acquisition during the year of Pro-Tec. The 226 employees (on

average) contributed € 19.6 million to consolidated revenue.

For an overview of the development of revenue in the divisions and regions, please refer to note 7 in

the notes to the consolidated financial statements.

summaRY ReView of net assets, financial position and Results of opeRationsIn 2011, we were again able to increase revenue and achieved this entirely through organic growth.

The stable development of the global economy, and in particular the economic recovery in Germany,

supported our revenue growth, with the result that we exceeded our forecast revenue target in the

range of 6% to 8%, despite divestitures.

As in the prior year, all strategic business segments made a positive contribution to consolidated revenue.

With the exception of the CENTRAL & EASTERN EUROPE region, which saw a slight decrease in

revenue, all the other regions and our core market of Germany recorded positive revenue growth.

EBIT adjusted for one-off effects increased by 9.1% year-on-year. By contrast, the adjusted EBIT margin

remained constant at 8.5% compared to the prior year. Adjusted earnings before tax were also higher

in the fiscal year, and the adjusted EBT margin was likewise unchanged compared to the prior year at

7.2%. These key indicators clearly show that the development of earnings at TÜV SÜD currently

remains at a consistently high level, despite positive revenue growth.

The clearly positive change in cash and cash equivalents including a rise in non-current securities

available for short-term sale demonstrates that we are well positioned for further growth.

We pursue a strategy of offering a balanced product portfolio of high-quality, sophisticated services

across industries and national borders while maintaining impartiality and objectivity. We therefore

intend to continue achieving positive business performance in the coming years. To be able to respond

to any changes in market expectations, we review this strategy regularly and update it as and when

necessary.

Business at TÜV SÜD developed well in terms of revenue, earnings and liquidity in 2011.

< >

see notes to the consolidated

financial statements

77


Operating performance decreased by € 5.4 million to € 44.3 million in fiscal 2011. This decrease is

primarily due to the change in the reporting of offsetting between divisions; the income is presented

in other operating income in the reporting period. On the other hand, there was an increase in income

realized from the offsetting relating to trademarks and management services with subsidiaries.

tÜV sÜd agTÜV SÜD AG is the management holding company of the TÜV SÜD Group. In fiscal year 2011, the

Group comprised a total of 65 legal entities in Germany and 148 in other countries. In addition to

providing support to the investment companies, the company provides central services, in particular

in the areas of law, HR, finance and controlling and procurement, innovation, organization, and

sales and marketing. The real estate owned by the company is leased at arm’s length via an agency

agreement with TÜV SÜD Immobilien Service GmbH, Munich, primarily to entities in the TÜV SÜD Group.

The company’s income thus stems from distributions and profit and loss transfer agreements of the

investment companies, income from the leased real estate, income from investments, income from

offsetting relating to trademarks, offsetting between divisions for central control, as well as management

and other services. The following summary of the net assets, financial position and results of operations

is based on the German GAAP financial statements.

net assets, financial position and Results of opeRationsresults of operations

in € million 2011 2010

revenue 44.3 49.7

operating performance 44.3 49.7

other operating income 23.6 16.7

personnel expenses –24.3 –23.0

amortization and depreciation –10.5 –11.9

other operating expenses –60.0 –56.4

operating result –26.9 –24.9

financial result 57.3 66.6

result from ordinary activities 30.4 41.7

extraordinary income 0.0 75.3

extraordinary expenses 0.0 –14.9

extraordinary result 0.0 60.4

income before taxes 30.4 102.1

income taxes –13.0 –22.5

net income for the year 17.4 79.6

profit carried forward 37.7 12.7

contributions to other revenue reserves –46.4 –52.5

retained earnings 8.7 39.8

T 02 iNCome STATemeNTTABLe T 02

income statement

78


Other operating income increased by € 6.9 million to € 23.6 million. The increase is also primarily due to

the change in the reporting of offsetting between divisions.

Personnel expenses increased by € 1.3 million to € 24.3 million compared to the prior year. The main

reasons for this were the increased headcount and pay increases under collectively bargained wage

agreements.

Other operating expenses grew by € 3.6 million to € 60.0 million. The key cost drivers were higher

maintenance expenses, marketing expenses, and services in connection with offsetting between

divisions. On the other hand, the year-on-year reduction in legal expenses and consulting fees for

various group-wide projects had a positive effect.

The financial result decreased by € 9.3 million to € 57.3 million. Income/loss from participations

developed positively compared to the prior year, as the impairment loss recognized on the share in

TÜV SÜD Life Science GmbH, via which the entities in the Msource group were held, and the

write-down to fair value of the participation in ARMAT Hessen GmbH & Co. KG no longer had an effect.

Income and expenses related to the contractual trust agreement (CTA) are presented net in the

interest result. The interest result was clearly negative due to the excess of interest expenses for the

CTA, mainly due to the considerably smaller increase in value of the Oktagon fund compared to the

prior year. The income from financial assets decreased as a result of the sale of securities to subsidiaries

in the course of the year and of the higher expenses for currency hedges compared to the prior year.

At € 30.4 million, the result from ordinary activities was € 11.3 million lower than the prior-year figure

of € 41.7 million.

Due to the first-time application of the BilMoG [»Bilanzrechtsmodernisierungsgesetz«: German Accounting

Law Modernization Act], an extraordinary result of € 60.4 million was recorded in the prior year.

Income taxes amounted to € 13.0 million, which was € 9.5 million less than in the prior year. Measured

in terms of the result from ordinary activities, the tax rate decreased from 54.0% to 42.8%. The

decrease is largely due to the write-down to fair value of shares, which could not be recognized for

tax purposes in the prior year.

Net income for the year amounts to € 17.4 million is therefore significantly lower (by € 62.2 million) than

the prior-year figure of € 79.6 million.

79


Under fixed assets, intangible assets and property, plant and equipment decreased largely due to

amortization and depreciation. The change of € 1.4 million in financial assets was immaterial. The

capital contributions of € 57.2 million in total including at TÜV SÜD Management Service GmbH, TUV SUD

South Africa Holding (Pty) Ltd., Cape Town, and TÜV SÜD Umwelt GmbH, the write-up of the shares

in TÜV SÜD Automotive GmbH, and the higher total loans to affiliated companies were partially offset

by the decrease in securities and other loans. Securities decreased due to sale to the environmental

companies as well as maturity.

Receivables and other assets decreased by € 10.4 million to € 12.7 million. The decrease is attributable

to factors including the change in the settlement method for trademarks and offsetting between divisions

owing to the reporting date, as well as to the cash pool repayments of TÜV SÜD e.V.

net assets

in € million dec. 31, 2011 dec. 31, 2010

assets

intangible assets 5.5 8.2

property, plant and equipment 109.7 110.6

financial assets 680.2 681.6

fixed assets 795.4 800.4

inventories 0.1 0.1

trade receivables and other assets 12.7 23.1

cash and cash equivalents 130.7 102.9

Current assets 143.5 126.1

prepaid expenses 1.0 1.2

total assets 939.9 927.7


capital subscribed 26.0 26.0

capital reserve 124.4 124.4

Revenue reserves 379.5 333.1

Retained earnings 8.7 39.8

equity 538.6 523.3

special item with an equity portion 10.0 10.0

provisions for pensions and similar obligations 11.2 17.2

tax provisions 2.1 3.8

other provisions 11.3 8.4

provisions 24.6 29.4

liabilities 366.7 365.0

total equity and liabilities 939.9 927.7

T 03 STATemeNT oF FiNANCiAL PoSiTioNTABLe T 03

statement of financial position

80


The provisions for pensions and similar obligations fell by € 6.0 million to € 11.2 million. This change

was essentially due to the increase in covering assets. The € 2.9 million increase in other provisions

mainly results from outstanding invoices for services already received for the modernization of a

building in Stuttgart.

The € 1.7 million increase in liabilities to € 366.7 million is due to various, almost offsetting effects.

TÜV SÜD Asia Pacific Holding Ltd., Singapore, granted TÜV SÜD AG a current loan for a time deposit

of € 36.9 million. At the same time, the cash pool liabilities of TÜV SÜD Auto Service GmbH and

TÜV SÜD Industrie Service GmbH decreased due to the capital increases performed at the environ-

mental companies.

finanCial position, equity and liabilities

The key goals of our financial management are to maintain solvency at all times and continuously

optimize liquidity.

Cash and cash equivalents rose by € 27.8 million to € 130.7 million. The operating companies’ positive

profit contributions, most of which are received as a result of profit and loss transfer agreements, and

the time deposit made by TÜV SÜD Asia Pacific Ltd., Singapore, granting a liability, were key factors.

Investments in participations, directly or indirectly via loans, as well as in securities for subsidiaries

had the opposite effect.

Equity rose by € 15.3 million to € 538.6 million. The change stems from the net income for the year of

€ 17.4 million less the profit distribution of € 2.1 million to TÜV SÜD Gesellschafterausschuss GbR.

In terms of the increase in total assets by € 12.2 million to € 939.9 million, the equity ratio rose from

56.4% to 57.3%.

overall statement on the Company’s situation

We are pleased with how the fiscal year developed in terms of revenue, earnings and liquidity.

We expect the net assets, financial position and results of operations to remain stable in the future.

81


non-financial peRfoRmance indicatoRs

maRKeting and communications – focusing on BRand ValueAn excellent reputation and a strong brand are an invaluable competitive advantage for a service

provider such as TÜV SÜD. For our customers and the public, our company’s brand name and the blue

octagon represent safety and certainty, reliability and independence. To ensure that stays this

way, we – together with the VdTÜV association – are giving the utmost attention to protecting the

TÜV brand and strengthening the positive perception of the brand.

proteCtinG the brand and the quality seal – zero toleranCe strateGy

The TÜV SÜD brand is officially registered with the German Patent and Trade Mark Office (DPMA), the

Office for Harmonization in the Internal Market (OHIM) and numerous foreign trade mark offices and

thus enjoys legal protection in almost every country in the world. The TÜV SÜD octagon containing the

TÜV SÜD logo is also a protected word/image mark. Since October 2010, the blue octagon has also

been registered separately from the word mark with the OHIM.

In a ruling of August 2011, the German Federal Court of Justice (BGH), Germany’s highest court for civil

and criminal proceedings, strengthened our brand considerably. The BGH confirmed the high awareness

of the TÜV brand. At the same time, the court emphasized that »TÜV« is not a generally accessible

designation for test services, even if the term is sometimes used as a synonym for test services and

quality checks. This means that in the future, as in the past, only TÜV companies may use the

designation.

When it comes to protecting our quality seal, we pursue a strict zero-tolerance strategy. This is not

merely in our own interest; it is also in the interest of consumers, who rely on our quality seal.

TÜV SÜD is a founding member of the Certification Industry Against Counterfeiting (CIAC), an association

of leading international product certification companies, formed in 2010. Coordinated by Interpol, the

members are tackling product piracy and quality-seal fraud worldwide.

international marketinG established

By means of comprehensive marketing activities, we aim to raise awareness of TÜV SÜD even further,

above all in the international environment. We initiated conceptual preparation to this end in 2011, and

the activities will be gradually implemented from 2012.

The focus is primarily on sharpening the brand profile and positioning the TÜV SÜD brand in the

competitive environment. By means of an internationally known, strong brand, we also want to

contribute to making TÜV SÜD even more attractive as an employer.

In 2011, we also laid the organizational groundwork for achieving these objectives. An international

marketing unit was established in March 2011. Based in both Munich and Singapore, it promotes

marketing activities in close collaboration with the divisions and the people responsible in the

respective countries.

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positive perCeption throuGh Corporate CommuniCations

The key tasks of the corporate communications are fostering TÜV SÜD’s public image and driving

change within the corporate culture. The function not only manages communications within the

TÜV SÜD Group worldwide, but also coordinates and implements TÜV SÜD’s central public relations

activities.

innoVations RepoRtSystematic development of new services is a decisive success factor for a technical service provider

like TÜV SÜD. The aim is to translate external impetus from technological progress or increasing

globalization into innovative, marketable products and services, thereby enhancing our portfolio. The

expertise of our employees and our global presence provide the ideal basis for achieving this.

The overarching aim of our innovations management is to achieve a marked and sustainable increase

in the share of new products and services. To this end, we have set ourselves the goal of »15 by 15«:

our objective is to grow the share of consolidated revenue generated with products and services that

have been on the market for less than five years to 15% by 2015.

Figure F 13

promotion of culture of innovation

In the fiscal year 2011, TÜV SÜD spent € 5.4 million on research and development, 14.9% or € 0.7 million

more than in the prior year. In addition, TÜV SÜD invested more than € 7.6 million on setting up

laboratories and test facilities for new services in the fields of battery testing, embedded systems and

energy efficiency. Moreover, many projects with high potential for innovation are being driven forward

within the strategic business segments and at division level. TÜV SÜD’s central innovations management

coordinates activities throughout the Group and promotes the culture of innovation within the company.

The range of innovative topics is every bit as varied as our business. The current focus is on four areas:

electromobility, renewable energies, embedded systems and the challenges posed by mega cities.

F 13 PromoTioN oF CuLTure oF iNNoVATioN

measuRes foR pRomoting cultuRe of innoVation

innonet discussion tool

innolunchtÜV sÜd

x-change

technologY daYs innofaiRinnoVation

paRtneRships

group-wide online portal networking with external experts management forum at the munich location

Research institutes at tÜV sÜd make innovations visible partnerships with associations and within research projects

83


eleCtromobility – potential reCoGnized at an early staGe

We see the promising electromobility market – with battery-driven electric cars, fuel cell vehicles and

hybrid vehicles – as offering particular opportunities for our company. We are convinced of the

potential of these new technologies and began systematically tapping into this at an early stage. Our

wide-ranging activities in recent years have ensured that we are already in a good competitive

position. Our goal is to take the leading position among test and certification service providers worldwide

in this field.

We further expanded our global network of test facilities for electromobility in 2011. Our new battery

test lab in Garching, near Munich, went into operation in August, for example. Further labs, in South

Korea, China and western Europe, will follow in 2012. Together with the existing facilities in the USA,

Canada and Singapore, this makes TÜV SÜD the only global test and inspection service provider with

a comprehensive international network of battery test facilities for electrical vehicles, with a consistent

level of quality and a global network of experts.

We want to help actively shape the future of electromobility. Developing our own standard for determining

the range of electric cars (TÜV SÜD E-Car Cycle) is just one of the ways in which we have contributed

to strengthening customer confidence in electrical cars. TÜV SÜD is advancing the development of

standards for inductive charging and is conducting its own analyses of efficiency and environmental

compatibility. Moreover, our company is safety partner for the development of DC rapid charging stations

and, of course, for conventional charging stations. In the various pilot regions and in future electromo-

bility lighthouse projects, TÜV SÜD experts will also contribute to the fields of fleet management and

carbon footprint as well as testing of new mobility options, such as car sharing concepts.

renewable enerGy is boominG

In the field of renewable energies, we support our customers as a service partner in all areas of

technology, across the entire value added chain.

Here, too, we have made important advances during the reporting period. With successfully implement-

ed projects, we forged ahead with the global roll-out of our service portfolio in the photovoltaic, water

and wind power sectors.

For example, in 2011, we were tasked with design evaluation, construction supervision and acceptance

for a 125 megawatts photovoltaic plant in Shivajinagar in the Indian state of Maharashtra. This is not only

the first large-scale plant of its kind in India but also the largest photovoltaic power plant in the world.

At the Swiss company Alstom Hydro, our activities focus on developing company-wide CE compliance

processes for hydro-electric components and power plants. We are implementing the associated CE

compliance processes at the sites in France, Spain and Switzerland and providing the customer with

consulting on specific CE questions.

In the field of wind energy, we were able to double our business volume and now offer the entire

spectrum of services thanks to the establishment of an offshore center in Hamburg.

84


embedded systems – a Cross-industry teChnoloGy with Great potential

Embedded systems are microprocessors that perform diverse tasks as parts of devices, systems and

machines. The spectrum of potential applications for these systems ranges from household appliances

to automotive technology through to aerospace.

As a cross-industry technology, embedded systems are particularly significant for TÜV SÜD. Growing

demands regarding information transfer between networked systems are giving rise to new questions

and tasks relating to the security and availability of these systems and networks. Events such as the

appearance of the Stuxnet virus in 2010 and 2011 bear striking testimony to this.

We want to support our customers in all aspects of deploying embedded systems: from checking the

conformity of individual components, to analyzing communication between devices and integration in

the system, through to the overall system security concept.

We pursue an interdisciplinary, cross-divisional approach and participate in relevant committees and

research projects. We pool our employees’ expertise in competence centers, enabling us to support

our customers across national borders and industry boundaries.

By setting up a Smart Grid Competence Center in 2011, we have taken the first important step in the

field of smart electricity grids. At the diagnosis lab for tests in accordance with IEC 61850, we test and

certify problem-free communications between devices and systems within the grid on behalf of our

customers. Our commitment in this area is supported by comprehensive training measures for our

employees. We are constantly training smart grid consultants in order to offer these new services

worldwide.

Other competence centers focusing on the deployment of embedded systems, for example in

industrial IT security, will follow. We intend to establish TÜV SÜD as the leading service provider for

secure deployment of embedded systems – mirroring our achievement in the field of electromobility.

masterinG the ChallenGe of meGa Cities

With increasing urbanization and global population growth, the number of mega cities with more than

10 million inhabitants is steadily rising – particularly in Asia. In 2010, there were already some 30 cities

of this kind worldwide.

Each of these mega cities poses new challenges in terms of infrastructure, public health, energy

supply and environmental protection. In view of our broad service portfolio, this opens up attractive

prospects for our company. The aim is to pool existing products and service packages specifically for

mega cities. In addition, within the scope of our innovations management, we are systematically

seeking new products that enable us to clearly differentiate ourselves from the competition in this

attractive new market.

An international team commenced its work in 2011 and conducted an internal analysis to define the

corresponding service portfolio for TÜV SÜD. There is considerable potential here, particularly in the

85


area of sustainability. Activities were rounded out by numerous preliminary meetings with external

partners and research institutes.

emploYeesSkilled, motivated employees are the foundation for growth and successful globalization. This is why we

want to recruit new, skilled employees for TÜV SÜD and retain and train existing employees. Extensive

training measures are designed to enable employees to take on new tasks quickly and flexibly. In this

way, we secure the future of our company – and create the conditions for sustainable growth.

As of the end of 2011, TÜV SÜD had a total of 16,451 employees (full-time equivalents). This constitutes

growth of 7.3% compared to the prior-year figure of 15,333 employees. The 2011 figure no longer

includes the employees of the divested Life Science division. Headcount decreased by 250 (full-time

equivalents) as a result of the sale of the Asian subsidiaries.

On the other hand, headcount increased by 591 through acquisitions and due to changes in the scope

of consolidation. The existing companies created 935 new jobs in 2011: 255 in Germany and 680 in

other countries.

The average number of full-time equivalents (FTEs) for the year 2011 was 16,018, 9.2% up on the prior

year. More than 80% of new employees work outside Germany, where the average number of FTEs

rose by 19.6%.

ChanGes in headCount in the strateGiC business seGments

The INDUSTRY strategic business segment continues to account for the largest number of TÜV SÜD

employees (5,943 employees as of the end of 2011). This is 8.6% up on the figure as of the prior-year

reporting date. The increase is due above all to the acquisition of the South African company Pro-Tec.

At end of 2011, the MOBILITY strategic business segment employed a total of 4,889 employees, 3.9%

up on the prior year. In this strategic business segment, new jobs were created particularly in Germany.

Figure F 14

development of employees

Figure F 15

changes in headcount by strategic business segment

12,360

2007

13,90914,874

2009 2010

13,122

2008 2011

16,018

F 14 DeVeLoPmeNT oF emPLoyeeS (ANNuAL AVerAge heADCouNT)

86


Headcount in our CERTIFICATION strategic business segment increased despite the divestitures in

ASIA PACIFIC. 4,211 persons were employed here as of the end of 2011, 9.9% more than a year earlier.

In the other companies, headcount increased in 2011 by 87 (+6.6%) to a total of 1,408 (prior year: 1,321).

This figure includes the 215 employees of the management holding company TÜV SÜD AG (prior year: 197).

headCount inCreasinG in all reGions

Overall, 42.7% of the entire TÜV SÜD workforce is employed outside Germany, where the average

annual headcount is 6,840.

In both percentage and absolute terms, headcount increased most in the MIDDLE EAST/AFRICA

region due to the acquisition of South African company Pro-Tec. TÜV SÜD now has 435 employees in

this region, 327 more than in the prior year.

Europe is subdivided into the WESTERN EUROPE region with 918 employees (+23.3%) and the

CENTRAL & EASTERN EUROPE region, where our Group employs 748 persons (–4.2%). This decrease

was caused primarily by the divestiture of the Czech entity e4t and the sale of our Czech crash-test

facility. We continue to have the largest number of employees in Germany. At the end of 2011, TÜV SÜD

had 9,331 employees here, 3.4% more than in the prior year.

In the AMERICAS region, headcount rose by 7.4% to 989.

Headcount in the ASIA PACIFIC region increased by 7.4% in the reporting period. TÜV SÜD now

employs 4,030 persons in this region.

foCus on attraCtiveness as an employer

In 2011, we took important steps to further increase TÜV SÜD’s attractiveness as an employer.

As a technical services provider, TÜV SÜD competes with other organizations worldwide to recruit the

best minds in the industry, particularly engineers and technical specialists. In order to find and attract

the right employees for our company in this environment, we have been active at institutions of higher

education for many years. Moreover, TÜV SÜD is expanding its support for young talent through

cooperation with universities in Germany and beyond, including Tongji University in Shanghai, China,

and TU Dresden in Germany.

Figure F 16

changes in headcount by region

5,474

3,832

4,706

5,943

4,211

4,889

+8.6%

+3.9%

+9.9%

industRY

moBilitY

ceRtification

F 15 ChANgeS iN heADCouNT By STrATegiC BuSiNeSS SegmeNT

2010

2011

2010

2011

2010

2011

87


We regularly present the TÜV SÜD Group at graduate job fairs, specialist presentations and special

in-house events, and cooperate closely with student initiatives. The trend here is toward increasingly

focusing on the target group and entering into dialogue with potential applicants at an early stage.

Moreover, as part of the »Deutschlandstipendium« initiative, we have been supporting students of

various disciplines at Munich University of Applied Sciences since 2011. The TÜV SÜD Foundation

plays an active role in the »Deutschlandstipendium« at TU Dresden in degree courses in various

technical disciplines.

In addition to these measures, which are of a more long-term nature, we also make use of conventional

channels in our search for new employees. These include the job bulletin board on our website, publishing

job advertisements and internet job exchanges.

TÜV SÜD’s attractive benefits, such as a healthy work-life balance, variable salary components and

company pensions, opportunities for an international career and our many and varied options for

training give us a competitive edge.

According to the latest rankings, TÜV SÜD is already among Germany’s most attractive employers

for engineers. We are also striving to achieve a leading international position in terms of employer

attractiveness. This plays a central role in the globalization of our marketing activities and will

increasingly shape TÜV SÜD’s external communication going forward.

Figure F 17

employer ranking

921

108

745

3,753

781

9,025

989

435

918

4,030

748

9,331

+7.3%

+7.4%

+302.8%

–4.2%

+23.3%

+3.4%

ameRicas

asia pacific*

middle east/afRica

centRal & easteRn euRope

westeRn euRope

geRmanY

F 16 ChANgeS iN heADCouNT By regioN

2010

2011

2010

2011

2010

2011

2010

2011

2010

2011

2010

2011

* asean, gReateR china, Japan, KoRea, south asia

88


traininG as a Competitive faCtor

Lifelong learning is a mandatory part of employee development at technical service provider TÜV SÜD.

Employees have to be able to adapt to new technologies, the challenges of the markets, and the

continuing international expansion of the Group.

TÜV SÜD assists its employees with a high-quality training program comprising seminars, workshops

and courses. We consider training to be the joint responsibility of the company and each and every

employee.

In light of this, TÜV SÜD’s internal employee academy gives our company an important competitive

edge. 6,124 employees completed one of a total of 598 interdisciplinary or specialist training courses

in 2011. TÜV SÜD is increasingly deploying new learning technologies, including »virtual classrooms«

that employees can log into by computer and phone at any TÜV SÜD location. This not only eliminates

travel time and expenses, it also enables employees of various subsidiaries to participate in the same

seminars across continents and national borders – a key factor in the increasing globalization of our

business.

preparinG manaGement for international tasks

When it comes to developing our managers, we primarily utilize systematic personnel development

within the Group. We provide our managers with training to prepare for secondments abroad or

changes of function. For junior managers, there are special programs that deliver the knowledge and

skills required for future management tasks.

These include the »TÜV SÜD Jump!« program. Through this 12-month program, TÜV SÜD has been

fostering high potentials who wish to further their personal development and are interested in a

position with international challenges since 2010.

Rank

25

30

35

40

45

50

55

60

65

70

universum student survey (enGineerinG) universum professional survey trendenCe institute

45 i 24 i 56 34 i 24 i 52 35 i 35 i 64 31 i 23 i 45

20112010

F 17 emPLoyer rANKiNg

2008 2009

89


In Asia, CHAMP (Corporate High Achievers’ Management Programme) for high potentials and the

MDP (Management Development Programme) support targeted personnel development.

It is also intended to offer CHAMP in the USA and Europe in the future.

trainees at tÜv sÜd

More than 114 trainees at TÜV SÜD were prepared for their careers in 2011 (prior year: 120). In addition

to traditional vocational training, TÜV SÜD offers high school graduates the opportunity to participate

in dual track courses in collaboration with universities of cooperative education for vehicle engineering

and services marketing. A large percentage of our trainees have chosen this option to combine theory

and practice in the best possible way.

reConCilinG family and Career

Reconciling the demands of career and family is a key component of our corporate social responsibility.

To achieve this, the Group’s »Beruf und Familie« initiative was launched Germany in 2009. The initiative

is to be expanded during the coming years, also at international level.

Since January 2009, we have been offering our employees throughout Germany assistance

with searches for child care or with nursing for sick relatives via the external service provider

pme Familienservices.

Measures include a corresponding seminar offering from TÜV SÜD Academy. Since 2011, we have

been offering our employees specialized seminars for parents-to-be. In addition, we provide

information on the support available in the event of family members falling sick or requiring care.

We reached further important milestones in 2011, with the adoption of works agreements in the areas

of »care« and »corporate integration management«.

The excellent response to these initiatives is proof that our commitment is valued. In 2011, we saw

another year-on-year increase in the number of people taking advantage of the pme Familienservices

offerings.

coRpoRate goVeRnance RepoRtActively practicing corporate governance is an integral part of our corporate culture. We are

convinced that this forms the basis for our success. This is why TÜV SÜD subscribes to responsible

and transparent corporate governance and control.

This goal finds concrete expression in clearly defined policies and rules, which apply throughout the

company and without exception. We regularly review these principles and adapt them in line with

new findings, changed legal provisions, and national and international standards. In this connection,

we are guided by the requirements placed on publicly traded companies by the German Corporate

Governance Code.

90


Our corporate governance system is essentially based on our dual management system, risk manage-

ment system and compliance management system, including the TÜV SÜD Code of Ethics.

Dual management and control system: As a German stock corporation (»Aktiengesellschaft«), TÜV SÜD AG

maintains a dual management and control system. This is characterized by the separation of personnel

between the management body and supervisory body. The Board of Management is responsible for

managing the company, develops the company’s strategic orientation, coordinates the same with the

Supervisory Board, and ensures it is implemented accordingly. The Supervisory Board monitors and

advises the Board of Management on the conduct of its business. Its agreement is required for

fundamental decisions.

The Supervisory Board of TÜV SÜD AG comprises 16 members. In accordance with German law, half

of the members are employee representatives and half are representatives of business and the

general public. An overview of the members of the Board of Management and Supervisory Board can

be found in the the consolidated financial statements.

Appropriate controlling and risk management system: We see efficient risk management and a

responsible approach to risks as inseparable from good corporate governance. This is why the Board

of Management continued to ensure appropriate risk management and risk controlling within the

company in the reporting year. Moreover, the Board of Management regularly reports to the Supervisory

Board on current risks and their development.

Our systematic risk management enables us to detect and evaluate risks at an early stage, allowing us

to contain any risks. Risk management comprises strategic corporate planning, the internal reporting

system, a compliance system, and an internal control system designed to monitor and manage risks.

Corporate compliance: Compliance with the law and regulations as well as internal company policies –

referred to in short as corporate compliance – is a core element of the corporate governance system

at TÜV SÜD AG.

Through a large number of measures, it ensures that the conduct of the company and its employees in

doing business always meets the highest standards – because we are aware that our success is

based to a great extent on the integrity of our company and of each and every employee. This is why

we take great care to ensure compliance with the law and regulations. The relevant company policies

and business processes are constantly reviewed and, where necessary, updated.

Through comprehensive compliance training – which was also provided in the reporting period –, we

ensure that our corporate compliance requirements are put into practice within the company. In this

way, we want to increase all employees’ understanding of responsible corporate governance geared

to adding sustainable value. Our business activities aim to avoid conflicts of interest and corruption,

comply with competition and anti-trust law, with tax law, as well as with trade control and embargo

regulations. Our internal policies use specific examples to provide our employees with guidance to

help them recognize critical situations in good time, avoid them and ensure compliance with ethical

< >

see page 163

91


and legal principles. Employees are required to confirm their adherence to corporate compliance in

writing. In this way, we protect our company, every individual employee and the business partners of

TÜV SÜD, thus enhancing trust in our integrity.

Employees and business partners can also report breaches of the TÜV SÜD code of conduct to an

external system of ombudsmen who are sworn to secrecy and anonymity. Suitable measures are

taken in the event of breaches, where necessary including labor law or disciplinary measures.

In order to implement the TÜV SÜD corporate compliance program and clarify all associated issues,

the Board of Management has appointed a Chief Compliance Officer. He supervises and monitors the

implementation of the corporate compliance program on his own initiative. The Chief Compliance

Officer is actively involved in the risk reporting processes. As a member of the risk committees of the

strategic business segments as well as for group-wide issues, he also took part in their meetings

during the reporting period.

The Chief Compliance Officer works closely with the internal audit function, receives its reports and

is involved in its yearly planning. In the fiscal year 2011, he prepared a compliance report for the Board

of Management of TÜV SÜD AG. Among other things, this reports on the further development of the

corporate compliance program and provides information on events of relevance. This compliance report

is a component of reporting by the Board of Management to the Supervisory Board.

In the reporting period, the corporate compliance team was enhanced by the addition of a new Global

Compliance Officer. In conjunction with the new appointment, the compliance organization was

aligned with the new global requirements within the Group. The new TÜV SÜD compliance organization

is intended to meet the demands placed on compliance organizations within compliance management

systems and ensure standard compliance measures worldwide. As part of the optimization of global

compliance measures, training was stepped up, particularly in the new markets, and adapted in line

with local requirements. To also meet the stringent demands of international anti-corruption law,

a new company regulation governing business relationships with third parties was passed, which is

valid worldwide.

92


RisK RepoRt

RisK management at tÜV sÜd With our comprehensive risk management system, we continually and systematically monitor external

and internal risks for all strategic business segments, their divisions and subsidiaries. We use

standardized criteria to evaluate risks throughout the Group in terms of potential loss and likelihood

of occurrence. We identify risks on the basis of current standards with risk categorization according

to TÜV SÜD-specific criteria.

Reporting on identified risks and implemented countermeasures is an integral component of our

standardized corporate planning and monitoring processes. It is incorporated in TÜV SÜD’s information

and communication system. Risk reports are submitted to the Board of Management and Supervisory

Board on a quarterly basis. Over and above these standardized reporting processes, significant issues

are communicated to company management in ad hoc reports.

We review our risk management system on a regular basis, develop it, and continually adapt it to

changes in legal or economic conditions, not least through regular benchmarking. In addition,

TÜV SÜD’s early warning system for the detection of risk is audited by the independent group auditor

in the course of the annual audit of the financial statements.

Risk management is firmly rooted in the Group’s management process. Each of the three strategic

business segments has a risk committee. Group-wide issues are handled by the corporate risk

committee. These four risk committees meet every quarter to analyze and evaluate the risk situation in

the respective strategic business segments, and initiate corresponding measures for risk minimization

and avoidance, if necessary. Final approval of the significant risks is given within the risk committees

in agreement with the member of the Board of Management responsible and the Chief Financial

Officer (CFO) of TÜV SÜD AG. The significant risks identified and approved in this way are reported to

the Group’s risk management board.

In the following, material risks that could significantly impact the net assets, financial position and

results of operations are discussed according to the categorization used by risk management.

industry and systemiC risks

TÜV SÜD is exposed to industry and systemic risks that could negatively affect the revenue and

earnings of all three strategic business segments, in particular in its core European market. These

risks mainly relate to sales and arise from the liberalization and deregulation of the European market,

such as possible changes in the legal framework for medical products or the authorization of local

public-sector technical services providers to perform appraisals for the issue of vehicle operating

licenses. The changes in the business environment have led to tougher competition in the business

segments affected. We have successfully mitigated these risks for years by continuously optimizing

our business processes, developing and implementing sales and marketing concepts, and diversifying

the portfolio of products and services.

93


Part of our business (e.g., the inspection of plant that requires monitoring) is subject to special provi-

sions of the law. Changes to this legal framework also have an effect on the development of business

at TÜV SÜD’s strategic business segments. New opportunities and risks can arise for our business

activities as a result. We therefore monitor our markets closely and take an active role in the public

debate on relevant topics. In this way, we seek to identify risks at an early stage and offset their effects.

We identify individual industry-specific and systematic risks in the three strategic business segments.

In the course of the sovereign debt crisis and the euro crisis in Europe, most European economies and

the USA have initiated a program of savings in order to consolidate budgets. Drastic government

cost-cutting could affect our business in all strategic business segments. Our customer base is generally

very diverse. However, government cost cuts also impact the private sector, and ultimately every

individual.

industRY strategic business segment

The INDUSTRY strategic business segment is particularly affected by the revision of the German

ordinance on industrial health and safety which is under discussion. This provides for changes in the

regular mandatory inspection of elevators subject to monitoring. TÜV SÜD leverages its presence on

various bodies and working groups such as the German Engineering Federation [»Verband Deutscher

Maschinen- und Anlagenbau e.V.«: VDMA] to contribute experience gained in its day-to-day testing

activities and actively help shape the revision of the legislation. We endeavor in this way to ensure the

greatest possible safety for people.

Uncertainties arising from possible changes in the legal basis for UN projects are placing a burden on

the area of climate protection projects in the INDUSTRY strategic business segment. Risk minimization

measures have already been initiated. In addition to intensive quality management, these encompass

a more targeted selection of projects.

moBilitY strategic business segment

In the MOBILITY strategic business segment, there are numerous obligations for the license holders

TÜVTURK Kuzey Tasit Muayene Istasyonlari Yapim Ve Isletim A.S., Istanbul, (TÜVTURK Kuzey) and

TÜVTURK Güney Tasit Muayene Istasyonlari Yapim Ve Isletim A.S., Istanbul, (TÜVTURK Güney) arising

from the concession agreement on vehicle inspections with the Turkish ministry of transport. Quality

management ensures compliance with the concession obligations. The equity contributed to the joint

venture companies is safeguarded against political risks by the Federal Republic of Germany’s

guarantee for capital investments.

At present, the »Technische Prüfstelle« (accreditation which authorizes TÜV SÜD to operate the road

vehicle technical inspectorate and the official inspection body) is solely responsible for appraising

vehicles prior to issuing an operating license pursuant to Section 21 StVZO [»Strassenverkehrszulassungs-

ordnung«: German road traffic licensing regulations]. If this responsibility is extended to local

public-sector technical services providers, this could lead to losses of our market share in the

MOBILITY strategic business segment.

94


The current lease agreement for a crash-test facility expires in the medium term. There is a risk of it

not being possible to conclude a new lease agreement at economically feasible terms or of not finding

suitable alternative premises. If neither alternative is successful, the crash-test facility would have to

be closed with corresponding consequences for employees, customers and market share.

ceRtification strategic business segment

In the CERTIFICATION strategic business segment, our business development is influenced signifi-

cantly by the economic situation. For example, the rapid economic recovery in Germany, with the

associated decrease in unemployment figures, resulted in a decrease in revenue in the subsidized

academy business. At the same time, demand for further training increased in the open market.

The loss of a key account to the competition or due to insourcing of formerly outsourced activities is a

potential risk faced by all our strategic business segments. We systematically mitigate this through

active customer care and by integrating customers into our global key account management. At the

same time, we maintain close contact with our customers in order to tailor our services as closely

as possible to their specific requirements.

The European Commission is currently looking into EU institutions assuming responsibility for the

approval of medical devices and medical products. To date, the European legal framework for the approval

and monitoring of medical products and medical devices provided for an inspection by an accredited

private-sector company (notified body). This reform brings uncertainties for the business model of the

CERTIFICATION strategic business segment. We are already developing further areas of activity and

are in direct contact with ECOMED and EUTOP GmbH. Together with other notified bodies, we are

developing a joint code of conduct and are applying the highest quality standards in order to ensure

patient safety.

operatinG risks

The strength of the TÜV SÜD brand and the great trust that our company enjoys worldwide are

decisive competitive advantages. Unprofessional or defective performance would damage our

reputation significantly. This is particularly the case with regard to the general public, which does

not draw distinctions when it comes to the TÜV brand name.

Extensive and clearly defined quality management worldwide and efficient and consistent order

controlling ensure that recognizable risks are identified at an early stage and countermeasures are

implemented promptly. In addition, we continually draw attention to the various market participants

with the TÜV brand name in our PR work.

The commitment, motivation and skills of its employees are key success factors for TÜV SÜD. We see

our employees’ training and international orientation as well as their ability to translate innovations

into customer benefits as personnel-related opportunities. However, risks arise if we are unable to

recruit suitable staff or retain high performers. We have implemented a large number of measures to

ensure the appeal of TÜV SÜD as an employer and support the long-term retention of employees

within the Group.

95


information teChnoloGy risks

Information processing plays a key role in our business activities. All major strategic and operational

functions and processes are supported to a large extent by information technology (IT) at TÜV SÜD.

Even in an intact IT environment, it is not possible to preclude risks entirely. The IT security measures

described below serve to protect the systems against risks and threats, to avoid damage and to

reduce risks to an acceptable level.

IT security at the TÜV SÜD Group is firmly established within the organization of the parent company.

The IT security officer, who reports directly to TÜV SÜD AG’s Head of Corporate IT, is involved from an

early stage in all projects that are of relevance for IT. The same applies to the data protection officer

where personal data is concerned.

Our internal IT security policies are based on national and international standards. They are regularly

updated and reviewed with regard to their effectiveness. We monitor the regulations and compliance

on an ongoing basis in order to guarantee the target level of security. The central IT systems are

monitored in such a way as to enable us to respond quickly to any disruption. Our corporate data are

protected by adequate measures according to the level of protection required for the respective data.

We use appropriate technology measures to protect our IT system against viruses and other harmful

codes and make sure that the antivirus systems are kept up to date at all times.

Extensive contingency measures are in place to ensure that we remain operative in the event of

extensive damage to our IT infrastructure – for example, through fire, environmental influences or

by force majeure. Comprehensive backups of the central systems also ensure that we can resume

operations – for the respective applications – within an acceptable time frame.

finanCial risks

The financing of TÜV SÜD and its operating companies is handled centrally by TÜV SÜD AG. Its role is

to provide sufficient reserves of liquidity for short- and medium-term financing requirements.

The financing of the Group is ensured by the above financing elements, together with the volume of

€ 327.8 million of cash and securities (prior-year reporting date: € 260.5 million) available as of the

reporting date, and the existing credit line, which has largely not been used. For details on cash and

securities please refer to the notes to the consolidated financial statements.

foreign exchange risk

As a global organization, the TÜV SÜD Group is exposed to foreign exchange risks from transactions

and currency translation.

transaction risks

Transaction risks can arise from every existing or forecast receivable or liability denominated in

foreign currency. The value of such receivables or liabilities fluctuates in line with changes in the

respective exchange rate.

96


In particular, the volatility of the US dollar to the Turkish lira has effects on the result of the vehicle

inspection operations of our Turkish subsidiary due to existing financing in US dollars. At the same

time, the exchange rate fluctuations also affect our share in profit or loss of the Turkish joint venture.

Here, too, there are loans in US dollars that affect our income from investments accounted for using

the equity method.

An internal policy requires all group companies to monitor their foreign exchange risks and hedge

them if they reach a certain volume. Forward exchange transactions are primarily used for hedging

purposes. The corporate treasury department is responsible for and enters into these transactions.

translation risks

Translation risks arise from the carrying amounts of participations denominated in foreign currency

and the related net income or loss for the year. TÜV SÜD prepares the consolidated financial statements

in euro. For the consolidated financial statements, the statements of financial position and income

statements of the entities located outside of the euro zone must be translated to the euro. The effects

of fluctuation in the exchange rates are disclosed in the appropriate items within equity in TÜV SÜD’s

consolidated financial statements. As the participations are generally of a long-term nature, we

monitor this risk, but do not hedge the net assets position. Another reason for this decision is that the

current and foreseeable effects on the consolidated statement of financial position are immaterial.

When borrowing in order to finance business combinations, however, we generally ensure the loan is

taken out in matched currencies to eliminate risk from fluctuations in exchange rates as far as possible.

interest rate and price risks

Interest rate risks arise from interest-bearing items and items that are directly linked to interest rates;

for securities, transaction risks arise from the market prices of the various investment instruments. In

principle, a distinction is made between the risk from the pensions portfolio and the operations of the

TÜV SÜD Group.

The risk strategy in the pensions portfolio is designed to limit some of the market risk from pension

obligations by means of structured, dedicated financial assets. Another objective is to compensate for

the interest cost of the hedged pension obligations wherever possible and to increase coverage over

time by generating a return on assets with the trustors waiving their pension reimbursements.

More than two thirds of the pension obligations are covered by financial assets that are segregated

from operating assets as a result of the contractual trust agreement (CTA) in order to reduce risks

associated with pension liabilities and allow an investment policy that reflects the obligations. The

domestic segregated pension assets are almost entirely managed in trust by TÜV SÜD Pension Trust

e.V., founded in 2005. They are invested by external investment companies in accordance with specific

investment principles. Interest rate and price risks relating to special non-current capital investment

funds are partly hedged by derivative financial instruments. The portfolio’s market value is subject to

fluctuations resulting from changes in interest rates and share prices. Should the actual return on plan

assets fall short of expectations, the resulting actuarial losses are charged to equity. At the same time,

97


when measuring pension obligations, changes in the interest rate spread in particular can influence

the discounting of pension obligations accordingly and thereby have consequences on equity.

A reduction in the discount rate for determining pension obligations could have a significant effect on

the structure of the Group’s equity. Another negative effect could arise from a potential reduction in the

average return on plan assets. This constitutes a corporate risk within the scope of risk management.

To counteract this risk, we have already started implementing a liability-driven investment strategy,

which involves adjusting the term of the investments in government and corporate bonds to the term

of the obligations.

During the fiscal year, end-to-end management of the pension portfolio was implemented at TÜV SÜD

Pension Trust e.V. This is based on the holistic risk budget specified by the TÜV SÜD AG Board of

Management for the first time for 2011. Alerts are displayed using a traffic light system when predefined

thresholds are reached. These alerts enable the individuals responsible at TÜV SÜD Pension Trust e.V.

to take (hedging) measures to ensure compliance with the risk budget. The implementation of all hedging

measures, i.e., hedging measures based on the risk concept as well as tactical measures via the

investment committee, are performed in a newly established control segment.

This fiscal year, TÜV SÜD Pension Trust e.V. began the step-by-step introduction of a sustainability

strategy for cash investments. The aim of the sustainability strategy is to further increase yield while

minimizing risk. In the Oktagon fund, the first segment with corporate bonds and mortgage bonds has

been converted to a sustainability approach. The fund manager works with sustainability rating

agency Oekom Research. Oekom Research assesses the sustainability of securities with a ranking

from A+ to D-. The managers only purchase securities that are rated as sustainable according to

the best-in-class principle. In addition, TÜV SÜD Pension Trust e.V. has specified exclusion criteria,

including corruption, accounting fraud and child labor, for the purchase of securities.

Additional segments will be converted to sustainability at the beginning of 2012. One segment with

predominantly long-term bonds will then also be managed according to the Oekom Research criteria

and the exclusion criteria defined by TÜV SÜD. The other segments that hold shares or fixed-interest

securities in their portfolio will now additionally be managed in accordance with the TÜV SÜD exclusion

criteria. Sustainable investment management is firmly enshrined in the relevant TÜV SÜD regulations.

Following these conversions, 80% of assets in the Oktagon fund of TÜV SÜD Pension Trust e.V. will be

sustainably managed. During the course of the year, appropriate concepts will be developed for the

remaining segments, which are not yet managed sustainably.

With regard to operating activities, financial derivatives are used exclusively to hedge underlying

transactions on a case-by-case basis. Interest rate swaps are our main hedging instrument. In the

case of the operator’s license for the vehicle inspection business at TÜV SÜD Bursa Tasit Muayene

98


Istasyonlari Isletim A.S., Osmangazi-Bursa, which is financed in US dollars, the floating interest rate

has been swapped for a fixed rate via a cash flow hedge. The loan at the joint venture TÜVTURK

Istanbul is also hedged at a fixed interest rate.

The purchase price financing for the purchase of the US-based GRC group was handled via a

syndicate of eight banks. Fifty percent of the floating-rate financing was changed to a fixed rate via

multiple interest rate swaps. Effects from changes in market value are recognized in the corre-

sponding item within equity.

brand risks

We continued our systematic, intensive brand management in 2011, thereby reinforcing our market

position. With its ruling of August 17, 2011, the German Federal Court of Justice (BGH) confirmed the

position of TÜV SÜD and prohibited the use of the TÜV brand name by competitors in their company

names or product/service designations. The corresponding corporate risk therefore no longer exists.

ComplianCe and other leGal risks

As of the end of the reporting period, several legal proceedings were still pending in connection with

services rendered by TÜV SÜD. Due to the existing global insurance cover, there were no material risks.

Sufficient provisions have been recognized to cover the remaining risk.

overall statement on the risks faCed by the Group

From a group perspective, we are giving particularly close attention not only to the equity risk from the

development of pension obligations and plan assets, but also to the revision of the German ordinance

on industrial health and safety. This affects the INDUSTRY strategic business segment.

The risk involving the greatest exposure – the changes in the measurement of pension obligations due

to a change in the interest rate of the pension obligations with effect on equity and a possible reduction

in the expected long-term return of plan assets – is a corporate risk. As the result of a German Federal

Court of Justice (BGH) ruling, the corporate risk relating to protecting the brand no longer exists.

Considered cumulatively, the CERTIFICATION strategic business segment has the gross risks involving

the highest exposure, ahead of the INDUSTRY and MOBILITY strategic business segments.

Considered by risk category, financial risks involve the highest exposure, followed by systemic and

industry risks.

With regard to the next two years, the risk management system set up by TÜV SÜD does not currently

indicate any risks that could seriously impact on TÜV SÜD’s net assets, financial position and results

of operations. All the organizational preconditions necessary to recognize developing risks at an early

stage have been met.

99


RisK RepoRt of tÜV sÜd agTÜV SÜD AG is an investment and management holding company. As such, its risk situation is

primarily determined by the economic situation of its participations.

In addition, there are financial risks in the form of interest rate risks, currency risks and price risks.

Interest rate risks arise in conjunction with liquidity management and refinancing. To hedge these

risks, derivative financial instruments in the form of interest rate swaps are also used. Foreign currency

risks can arise from any existing or forecast receivable or liability denominated in foreign currency.

They are mainly hedged using forward exchange contracts. Price risks arise from changes in the market

price of diverse securities.

Industry and systemic risks arising from the market conditions in the strategic business segments and

regions are recorded using market and competitive analyses and discussed in strategy meetings.

suBsequent eVents

As of March 27, 2012, no significant events had occurred that could significantly influence the

TÜV SÜD Group.

foundation

At the end of 2009, TÜV SÜD e.V. set up a non-profit foundation, the TÜV SÜD Foundation, and made an

initial endowment of € 500,000. The purpose of the foundation is to promote science and research,

education, environmental protection and accident prevention. As a result, TÜV SÜD e.V. transferred

25.1% of its beneficial ownership in the shares of TÜV SÜD AG to the TÜV SÜD Foundation as of

January 1, 2010 by granting the foundation a participation in TÜV SÜD Gesellschafterausschuss GbR.

In the internal relationship between the shareholders, TÜV SÜD e.V. and the TÜV SÜD Foundation hold

a share of 74.9% and 25.1%, respectively, in the assets of TÜV SÜD Gesellschafterausschuss GbR. The

registered offices of TÜV SÜD e.V. were relocated from Mannheim to Munich at the same time. In the

future, the foundation will be funded primarily by the dividend paid on the shares it holds in TÜV SÜD AG.

The non-profit TÜV SÜD Foundation commenced its activities in 2010. It was presented to the public

at large at a ceremony on May 6, 2010. Three funded projects intended to arouse young people’s inter-

est in technology and the natural sciences are currently in progress. The »TÜV SÜD Foundation Kids«

100


project aims to make technology and the natural sciences accessible to children through play.

Experiments are used to kindle the children’s enthusiasm and enable them to experience technology

firsthand. In addition, the »TÜV SÜD Foundation Visiting Professorship« has been created at Technische

Universität München (TUM). Within the scope of the project, the university can invite internationally

renowned scientists and specialists in areas such as energy efficiency, climate protection, testing

techniques, product and industrial plant safety, and risk and compliance management to participate in

the exchange program. The »Im Dschungel« (»In the Jungle«) exhibition staged at the Kinder- und

Jugendmuseum München (museum for children and young people in Munich) is another project chosen

for funding in 2011.

oppoRtunities and outlooK

futuRe deVelopment of the tÜV sÜd gRoupoutlook for 2012 and 2013

The three-year budgetary planning for the period from 2012 to 2014, which was created by the Board

of Management, was approved by the Supervisory Board of TÜV SÜD in December 2011. This forms

the basis of the following statements on the outlook for the next two fiscal years.

We have regularly examined possible effects of the renewed financial and economic crisis on the

strategic business segments. These findings have been included in the outlook, along with the

requirements from the strategy planning process and the measures of the TÜV SÜD FIT 2012+ program.

We assume that the global economy will develop at a slower pace. The economies of Asia will no

longer develop so rapidly, though they will continue to grow significantly. Economic development in

the USA will tend to be more moderate, but will be seen as more positive on the whole. In the euro

zone, the European debt crisis, the associated cost cuts and the population’s increasing distrust in the

entire banking system will continue to dampen economic development. However, following a down-

ward trend and a forecast recovery in the second half of 2012, the German economy is expected to buck

the trend in the euro zone and continue to grow slightly. We therefore expect global economic

development to stabilize overall for 2012 and 2013.

For 2012, we expect to generate consolidated revenue of approximately € 1.8 billion with existing

entities. For 2013, we expect a continued revenue increase in the range of 6% to 8%. Possible effects

of business combinations and disposals are not taken into account here.

The non-German entities’ share of consolidated revenue is expected to increase further over the next

two years. In the medium term, we aim to generate more than 40% of consolidated revenue outside

Germany.

101


Following a good fiscal year 2011, the INDUSTRY strategic business segment will feel the effects of

the early phasing out of nuclear power in the forecast period, particularly in Germany. Corresponding

provisions have been taken in this area and are taken into account in our planning. We therefore

expect annual revenue to grow in the middle single-digit range in the forecast period. This does not

take further business combinations into account.

We see potential for worldwide growth in the field of technical solutions for clean energy generation

and renewable energies. There are additional growth opportunities in our service portfolio for the

chemicals and petrochemicals industry in our core market of Germany and in the AMERICAS region,

as well as through the expansion of our activities relating to supply chain management.

Sustainability is also the focus of our services for the real estate sector. Energy efficiency and

resource-efficient buildings will be future growth drivers. With our new offerings in the areas of infra-

structure, facility management and consulting during construction, we are systematically addressing

the ASIA PACIFIC and MIDDLE EAST/AFRICA regions, where construction is booming.

The rail transport and signaling technology segment will continue its dynamic growth. Here we are

planning to expand our offering for urban rail transport and energy technology.

Following a successful year in 2011, we expect the MOBILITY strategic business segment to see high

single-digit growth rates in 2012 and 2013 respectively.

Our offering for retail and business customers in Germany will remain a key driver, particularly

roadworthiness tests and exhaust-gas analyses, fleet management and professional vehicle services.

At the same time, we will apply the winning vehicle inspection model, which we have already

successfully developed in Turkey, to other growth markets where private transport is on the rise. A

first step has already been taken: in January 2012, we established a pilot service station in New Delhi,

India, where vehicle inspections are expected to begin in mid-2012.

Services relating to homologation and functional safety will increasingly contribute to revenue not

only in our home market of Germany but also in WESTERN EUROPE and ASIA PACIFIC. Following the

sale of our subsidiary e4t and the crash-test laboratory, we expect a decrease in revenue in the

CENTRAL & EASTERN EUROPE region, which will be offset in the medium term by the establishment of

a new airbag test lab.

We plan to continuously increase revenue in the areas of healthcare management, occupational

health and safety, and traffic psychology and medicine. There will be positive effects, particularly at

the end of the forecast period, due to an expected fees increase in the area of public-sector traffic

psychology and medicine services.

We again expect the highest percentage increase in the forecast period to be recorded in the

CERTIFICATION strategic business segment, where we forecast a low double-digit growth rate in

revenue in each year.

102


Our service offering relating to the market readiness of industrial products is the key growth driver.

Additional impetus comes from the extension of our activities in the new fields of photovoltaic, battery

testing as well as medical and consumer products, particularly in the area of textiles. By creating

a global laboratory network, we enhance efficiency through optimized capacity utilization and also

satisfy the requirements of our customers with global operations. Growth in the ASIA PACIFIC and

AMERICAS regions is enabled by investments in laboratory capacities and the hiring of expert personnel.

In the area of certification of quality, eco and safety management systems for all industries, we are

continuing to systematically expand our service offering. The focus here is on food safety, energy and

sustainability.

Following the portfolio streamlining in our basic and advanced training business, which primarily

includes the divestiture of PSB Academy in Singapore, we expect almost double-digit revenue

growth on average for 2012 and 2013. The offering relating to personnel certification and in the open

seminar business will be the main growth driver not only in Germany, but also in ASIA PACIFIC.

For the coming years, we expect revenue growth in all regions. Specifically, we anticipate an increase

in the middle single-digit range in EUROPE and forecast a slightly higher growth rate in the AMERICAS

region. However, we expect significantly stronger revenue growth in the ASIA PACIFIC and MIDDLE

EAST/AFRICA regions. In these regions, we expect an annual increase in the low double-digit range at

the existing entities.

further inCrease in earninGs planned

The development of earnings at TÜV SÜD is decisively influenced by our ability to satisfy the require-

ments of our customers with our services and innovations, and to meet customer needs through

flexible working models, as well as taking an active approach to efficiently shaping our cost structures.

External factors, such as the development of the US dollar exchange rate against the euro, impact

directly on the earnings of TÜV SÜD operating subsidiaries. Potential exchange rate fluctuations also

influence the financial result as they change the net risk exposure of our investment in vehicle

inspection in Turkey. A subsidiary domiciled there and a joint venture that we account for using the

equity method are financed in US dollars.

We expect to be able to increase consolidated income before taxes at least in line with revenue in

2012, and expect a further increase for 2013. We estimate that consolidated income before taxes will

continue to be influenced by the low interest level on the capital market in the long term. We expect

the application of the new IAS 19 to give rise only to low effects on earnings as of 2013. The return on

plan assets expected for 2012 approximates the discount rate used for pension obligations. Actual

deviations from the expected return will be recognized in equity pursuant to IAS 19.

103


Earnings before interest, currency translation gains/losses from financing measures and income

taxes, but after income from participations (EBIT) increase continually as a consequence of our strategic

orientation toward technical and geographic growth markets. The positive development of earnings

depends on various factors that are not interdependent. Influencing factors include the trend toward

stability in the global economy, the systematically implemented goals of the TÜV SÜD FIT 2012+ program,

the successful integration of the companies acquired in 2011, as well as the increasing economic

significance of innovative technical services. The continuous development of the TÜV SÜD FIT 2012+

program will continue to help us achieve our Group’s goals in the future. We expect the EBIT margin to

improve constantly in the two following years up to our strategic target of approximately 11% for 2013.

Please note that actual events in the course of the coming fiscal years could deviate from our

expectations. We have included the possible effects of the euro debt crisis in our forecast as well as

developments in the global economy which could also affect us. We do not expect a significant

one-off effect on income before taxes in the forecast period.

We will continue to systematically implement our corporate strategy in the coming years. We are

concentrating our activities on attractive technologies and industries with long-term growth prospects.

The regional focus is on markets characterized by high economic growth and a reliable business

environment. In Germany, our activities are primarily aimed at maintaining high market shares, while

in the ASIA PACIFIC, AMERICAS and MIDDLE EAST/AFRICA regions we want to expand the range

of competencies and services. We are expanding our market position outside Germany in particular

through targeted acquisitions and using the opportunities that arise in promising, profitable markets.

We will make every effort to increase our profitability worldwide, but also and above all to further the

development of our employees – because their knowledge and experience are the key to TÜV SÜD’s

success.

TÜV SÜD developed well in 2011. The positive underlying mood of the German economy, our focus on

our technical core competencies, streamlining of the service portfolio, and targeted acquisitions have

fueled the company’s growth. In the coming years, we will continue to focus our efforts on achieving

our defined strategic goals. The development of the TÜV SÜD Group to date confirms that the course

we have taken is the right one. We firmly believe that TÜV SÜD will continue to develop successfully

and positively in the future.

104


Content

Page 106

Consolidated

inCome statement

Page 107

Consolidated statement

of Comprehensive inCome

Page 108


of finanCial position

Page 109

Consolidated statement of Cash flows

Page 110


of Changes in equity

Page 112

notes to the Consolidated

finanCial statements

Page 162

auditor’s report

Page 163

Corpor ate boards

Chapter 4ConsolidatedFinancial Statements

Earnings before interest, currency translation gains/losses from financing measures and income

taxes, but after income from participations (EBIT) increase continually as a consequence of our strategic

orientation toward technical and geographic growth markets. The positive development of earnings

depends on various factors that are not interdependent. Influencing factors include the trend toward

stability in the global economy, the systematically implemented goals of the TÜV SÜD FIT 2012+ program,

the successful integration of the companies acquired in 2011, as well as the increasing economic

significance of innovative technical services. The continuous development of the TÜV SÜD FIT 2012+

program will continue to help us achieve our Group’s goals in the future. We expect the EBIT margin to

improve constantly in the two following years up to our strategic target of approximately 11% for 2013.

Please note that actual events in the course of the coming fiscal years could deviate from our

expectations. We have included the possible effects of the euro debt crisis in our forecast as well as

developments in the global economy which could also affect us. We do not expect a significant

one-off effect on income before taxes in the forecast period.

We will continue to systematically implement our corporate strategy in the coming years. We are

concentrating our activities on attractive technologies and industries with long-term growth prospects.

The regional focus is on markets characterized by high economic growth and a reliable business

environment. In Germany, our activities are primarily aimed at maintaining high market shares, while

in the ASIA PACIFIC, AMERICAS and MIDDLE EAST/AFRICA regions we want to expand the range

of competencies and services. We are expanding our market position outside Germany in particular

through targeted acquisitions and using the opportunities that arise in promising, profitable markets.

We will make every effort to increase our profitability worldwide, but also and above all to further the

development of our employees – because their knowledge and experience are the key to TÜV SÜD’s

success.

TÜV SÜD developed well in 2011. The positive underlying mood of the German economy, our focus on

our technical core competencies, streamlining of the service portfolio, and targeted acquisitions have

fueled the company’s growth. In the coming years, we will continue to focus our efforts on achieving

our defined strategic goals. The development of the TÜV SÜD Group to date confirms that the course

we have taken is the right one. We firmly believe that TÜV SÜD will continue to develop successfully

and positively in the future.

Content

Page 106

Consolidated

inCome statement

Page 107


of Comprehensive inCome

Page 108


of finanCial position

Page 109


Page 110


of Changes in equity

Page 112

notes to the Consolidated

finanCial statements

Page 162

auditor’s report

Page 163

Corpor ate boards

Consolidated inCome statement

T 04 ConsolidaTed inCome sTaTemenT for The period from January 1 To deCember 31, 2011

in €‘000 note 2011 2010

continuing operations

Revenue (7) 1,677,739 1,552,484

own work capitalized 2,498 103

Purchased services –224,960 –206,443

Operating performance 1,455,277 1,346,144

Personnel expenses ( 8 ) –986,153 –900,053

amortization, depreciation and impairment losses (9) –52,386 –54,560

other expenses (10) –318,502 –290,407

other income (11) 65,492 36,079

Operating result 163,728 137,203

income from investments accounted for using the equity method (13) 1,472 6,482

interest income (13) 4,670 5,796

interest expenses (13) –27,399 –24,560

other financial result (13) –8,859 –1,555

Financial result –30,116 –13,837

Income before taxes 133,612 123,366

income taxes (14) –26,865 –35,193

Profit/loss from continuing operations 106,747 88,173

discontinued operations

Profit/loss from discontinued operations (after taxes) (15) 451 –13,556

Consolidated net income 107,198 74,617

attributable to:

owners of tÜV sÜd aG 100,466 68,976

non-controlling interests (16) 6,732 5,641

106


Consolidated statement of ComPrehensiVe inCome

T 05 ConsolidaTed sTaTemenT of Comprehensive inCome for The period from January 1 To deCember 31, 2011

in €‘000 2011 2010


actuarial gains and losses from defined benefit pension plans and similar obligations

–22,965

–30,453

available-for-sale financial assets

Changes from unrealized gains and losses 532 –190

Changes from realized gains and losses –9 523 –242 –432

Currency translation differences

Changes from unrealized gains and losses 1,885 16,699

Changes from realized gains and losses –6,010 –4,125 0 16,699

Cash flow hedges

Changes from unrealized gains and losses –991 –703

Changes from realized gains and losses 0 –991 0 –703

investments accounted for using the equity method

Changes from unrealized gains and losses 34 0

Changes from realized gains and losses 0 34 0 0

deferred taxes –2,742 11,777

Other comprehensive income –30,266 –3,112

Total comprehensive income 76,932 71,505

attributable to:

owners of tÜV sÜd aG 70,120 65,504

non-controlling interests 6,812 6,001

for more information please refer to note 17

107

TÜV SÜD AnnuAl RepoRT 2011

Consolidated statement of finanCial Position

in €‘000 note dec. 31, 2011 dec. 31, 2010*

assets

intangible assets (18) 231,707 226,941

Property, plant and equipment (19) 367,110 352,418

investment property (20) 5,798 5,375

investments accounted for using the equity method (21) 23,849 63,096

other financial assets ( 22 ) 123,251 102,509

other non-current assets (23) 4,402 4,283

deferred tax assets (14) 67,938 68,550

Non-current assets 824,055 823,172

inventories (24) 3,230 2,625

trade receivables (25) 293,115 265,946

income tax receivables 11,183 6,281

other receivables and other current assets (26) 53,102 71,085

Cash and cash equivalents (27) 245,285 189,225

non-current assets and disposal groups held for sale (28) 6 16,183

Current assets 605,921 551,345

Total assets 1,429,976 1,374,517


Capital subscribed (29) 26,000 26,000

Capital reserve (29) 124,354 124,354

revenue reserves (29) 354,661 282,746

other reserves (29) 1,365 6,125

Equity attributable to the owners of TÜV SÜD AG 506,380 439,225

non-controlling interests 32,642 31,995

Equity 539,022 471,220

Provisions for pensions and similar obligations (30) 386,307 394,381

other non-current provisions (31) 27,480 29,520

non-current financial debt (32) 73,294 18,055

other non-current liabilities (34) 13,206 13,739

deferred tax liabilities (14) 28,627 23,189

Non-current liabilities 528,914 478,884

Current provisions (31) 117,416 118,636

income tax liabilities 10,195 11,112

Current financial debt (32) 9,739 57,305

trade payables (33) 68,264 67,280

other current liabilities (34) 156,426 162,206

liabilities directly associated with non-current assets and disposal groups held for sale (28) 0 7,874

Current liabilities 362,040 424,413

Total equity and liabilities 1,429,976 1,374,517

* Prior-year figures restated, please refer to note 6

T 06 ConsolidaTed sTaTemenT of finanCial posiTion as of deCember 31, 2011

108



T 07 ConsolidaTed sTaTemenT of Cash flows for The period from January 1 To deCember 31, 2011

in €‘000 2011 2010*


amortization, depreciation, impairment losses and write-ups of intangible assets, property, plant and equipment and investment property 52,386

56,167

impairment of goodwill from discontinued operations 0 12,167

impairment losses and write-ups of financial assets 14,164 3,083

Change in deferred tax assets and liabilities recognized in the income statement 3,184 –2,422

Gain/loss on disposal of non-current assets –8,700 –1,532

Gain/loss on sale of shares in fully consolidated entities and business units –27,164 0

other non-cash income/expenses 2,524 –6,125

Change in inventories, receivables and other assets –9,449 –15,935

Change in liabilities and provisions 20,416 24,918

Cash flow from operating activities 154,559 144,938

Cash paid for investments in

intangible assets, property, plant and equipment und investment property –64,395 –52,234

financial assets –3,843 0

securities –38,556 –22,949

business combinations (net of cash acquired) –27,332 –80,492

Cash received from disposals of

intangible assets and property, plant and equipment 3,848 6,856

financial assets 7,370 19,204

securities 26,042 7,745

shares in fully consolidated entities and business units (net of cash disposed of) 41,081 0

Contribution to pension plans –46,533 –44,982

Cash flow from investing activities –102,318 –166,852

dividends paid to owners of tÜV sÜd aG –2,080 –1,040

dividends paid to non-controlling interests –3,196 –3,170

Proceeds from loans/repayments of loans including exchange rate effects 8,677 27,552

other payments –3,880 –47

Cash flow from financing activities –479 23,295

Net change in cash and cash equivalents 51,762 1,381

reclassifications to »held for sale« 0 –2,817

effect of currency translation differences and change in scope of consolidation on cash and cash equivalents 4,298 2,155

Cash and cash equivalents at the beginning of the period 189,225 188,506

Cash and cash equivalents at the end of the period 245,285 189,225

additional information on cash flows included in cash flow from operating activities:

interest paid 3,305 3,015

interest received 4,328 4,686

income taxes paid 30,961 31,507

income taxes refunded 1,059 13,688

dividends received 1,105 1,388

for more information please refer to note 40

* Prior-year figures restated, please refer to note 6

109


Consolidated statement of ChanGes in equity

T 08 ConsolidaTed sTaTemenT of Changes in equiTy for The period from January 1 To deCember 31, 2011

revenue reserves*

other reserves*

in €‘000Capital

subscribedCapital

reserve

actuarial gains and

losses from defined

benefit pensionplans

other revenuereserves

Currencytranslation

differences

available-for-sale

financial assets Cash flow

hedges

investments accounted for

using the equity method

Equity attributable to the owners of TÜV SÜD AG

non- controlling

interestsTotal

equity

As of January 1, 2010 26,000 124,354 76,196 159,076 –8,200 311 –1,100 0 376,637 25,555 402,192

total comprehensive income –18,586 68,976 15,867 –302 –451 65,504 6,001 71,505

dividends paid –1,040 –1,040 –3,170 –4,210

Changes in scope of consolidation –1,823 –1,823 3,609 1,786

other changes –53 –53 –53

As of December 31, 2010 26,000 124,354 57,610 225,136 7,667 9 –1,551 0 439,225 31,995 471,220

total comprehensive income –25,586 100,466 –4,500 365 –652 27 70,120 6,812 76,932

dividends paid –2,080 –2,080 –3,196 –5,276

Changes in scope of consolidation –681 –681 –2,971 –3,652

other changes –204 –204 2 –202

As of December 31, 2011 26,000 124,354 32,024 322,637 3,167 374 –2,203 27 506,380 32,642 539,022

* Prior-year figures restated; for more information please refer to note 6

110


revenue reserves*

other reserves*

in €‘000Capital

subscribedCapital

reserve

actuarial gains and

losses from defined

benefit pensionplans

other revenuereserves

Currencytranslation

differences

available-for-sale

financial assets Cash flow

hedges

investments accounted for

using the equity method

Equity attributable to the owners of TÜV SÜD AG

non- controlling

interestsTotal

equity

As of January 1, 2010 26,000 124,354 76,196 159,076 –8,200 311 –1,100 0 376,637 25,555 402,192

total comprehensive income –18,586 68,976 15,867 –302 –451 65,504 6,001 71,505

dividends paid –1,040 –1,040 –3,170 –4,210

Changes in scope of consolidation –1,823 –1,823 3,609 1,786

other changes –53 –53 –53

As of December 31, 2010 26,000 124,354 57,610 225,136 7,667 9 –1,551 0 439,225 31,995 471,220

total comprehensive income –25,586 100,466 –4,500 365 –652 27 70,120 6,812 76,932

dividends paid –2,080 –2,080 –3,196 –5,276

Changes in scope of consolidation –681 –681 –2,971 –3,652

other changes –204 –204 2 –202

As of December 31, 2011 26,000 124,354 32,024 322,637 3,167 374 –2,203 27 506,380 32,642 539,022

* Prior-year figures restated; for more information please refer to note 6

111


Basis of PreParation1 | GENERAl INFORmATION

TÜV SÜD is a global technical services provider operating

in the strategic business segments INDUSTRY, MOBILITY

and CERTIFICATION. Apart from our domestic market in

Germany, TÜV SÜD has a presence in the regions WESTERN

EUROPE, CENTRAL & EASTERN EUROPE, MIDDLE EAST/

AFRICA, ASIA PACIFIC and AMERICAS. The range of services

covers consulting, testing, certification and training.

TÜV SÜD Aktiengesellschaft, with registered offices in

Munich, Germany, is entered in the commercial register of

Munich District Court under the number HRB 109326, as

the parent company of the Group.

TÜV SÜD AG prepared its consolidated financial statements

as of December 31, 2011 in accordance with the International

Financial Reporting Standards (IFRSs) by exercising the

option under Section 315a (3) HGB [»Handelsgesetzbuch«:

German Commercial Code]. All IFRSs that are binding for

the fiscal year 2011 and the pronouncements issued by the

International Financial Reporting Standards Interpretations

Committee (IFRS IC) have been applied to the extent that

these have been adopted by the European Union.

On March 27, 2012, TÜV SÜD AG’s Board of Management

approved the 2011 consolidated financial statements for

submission to the Supervisory Board.

2 | SCOPE OF CONSOlIDATION

In addition to TÜV SÜD AG, the consolidated financial state-

ments as of December 31, 2011 include all material domestic

and foreign companies in which TÜV SÜD AG holds either

a direct or indirect majority of voting rights, or whose financial

and operating policy it controls in some other manner. Special

purpose entities (SPEs) which were formed for a closely

defined purpose and where the Group does not have the

majority of voting rights are allocated to subsidiaries if they

are controlled by the Group from a substance over form

perspective. This is the case especially when the business

activities are exercised in accordance with TÜV SÜD AG’s

special requirements, TÜV SÜD AG has the power to obtain

the majority of the benefits from the entity’s activities, and the

majority of the residual and ownership risks associated with

the special purpose entity are retained by TÜV SÜD AG. The

entities are included in the consolidated financial statements

from the date on which the Group obtains the possibility of

control.

Associated companies are accounted for in the consolidated

financial statements using the equity method. Entities in

which TÜV SÜD together with other venturers undertakes

an economic activity that is subject to joint control (joint

ventures) are also accounted for using the equity method.

notes to the Consolidated finanCial statements

112


The number of fully consolidated subsidiaries comprises

three special purpose entities as in the prior year. They have

been included in the consolidated financial statements in

accordance with IAS 27 in conjunction with SIC 12 because

the benefits from the entities’ activities and the residual and

ownership risks are exclusively attributable to TÜV SÜD AG

on the basis of the contractual agreements despite the fact

that it does not hold the majority of voting rights in the entities.

The scope of consolidation was extended in 2011 to include

– five entities acquired in 2011

– one entity founded in 2011

– nine entities previously not consolidated which were

consolidated for the first time due to their increased

materiality.

The disposals of fully consolidated entities relate to the sale

of eleven entities, four mergers into other group entities and

the removal of an entity without operations from the scope of

consolidation.

The disposals of associated companies accounted for using

the equity method result from the sale of one entity and the

change in how the ATISAE group is included. Despite a 45.2%

share in voting rights, TÜV SÜD’s actual involvement in the

financial and operating policy decisions is no longer sufficient

to claim or substantiate significant influence. As a result, the

ATISAE group is measured at cost from January 1, 2011 and

reported in other financial assets under participations.

number of entities Germany other countries total

TÜV SÜD AG and fully consolidated subsidiaries

January 1, 2011 43 61 104

additions 4 11 15

disposals (including mergers) –5 –11 –16

December 31, 2011 42 61 103

Associated companies accounted for using the equity method

January 1, 2011 1 4 5

additions 0 0 0

disposals –1 –1 –2

December 31, 2011 0 3 3

Joint ventures accounted for using the equity method

January 1, 2011 0 3 3

additions 0 0 0

disposals 0 0 0

December 31, 2011 0 3 3

Total

January 1, 2011 44 68 112

additions 4 11 15

disposals (including mergers) –6 –12 –18

December 31, 2011 42 67 109

The scope of consolidation changed as follows in the fiscal year 2011:

T 09 sCope of ConsolidaTion

113


Entities that are not material for the presentation of a true and

fair view of the net assets, financial position and results of

operations of the Group were not included in the consolidated

financial statements. The impact of the option to forgo full

consolidation amounts to a 0.7% fall in consolidated revenue

(prior year: 1.0%) and a 0.3% increase in consolidated equity

(prior year: 0.3%). Moreover, nine associated companies

(prior year: eight) were not consolidated due to immateriality.

The separate financial statements of the subsidiaries, associated

companies and joint ventures included in the consolidated

financial statements were all prepared for the same period as

the consolidated financial statements with the exception of

those of one associated company (separate financial statements

as of September 30).

The affiliated companies, associated companies and joint

ventures included in the consolidated financial statements

are listed in note 44 »Consolidated entities« along with the

consolidation method applied. The list of the Group’s entire

shareholdings is published in the German Electronic Federal

Gazette (elektronischer Bundesanzeiger) as an integral part

of the notes to the financial statements.

3 | BuSINESS COmBINATIONS AND DISPOSAlS

Business combinations in the 2011 fiscal year

In fiscal 2011, TÜV SÜD made seven acquisitions which were

immaterial individually and collectively had the following

effect on the consolidated financial statements (based on the

amounts as of the respective acquisition dates):

Hidden reserves totaling € 15,298 thousand were identified

in the order backlog, customer relationships and in accredi-

tations with useful lives of between two and 15 years.

The goodwill arising on these acquisitions includes

expected synergy effects in particular.

Earn-out agreements were concluded with a term ending

between December 31, 2011 and December 31, 2014. The

future purchase price payments from the earn-out agreements,

which depend on reaching specified revenue and earnings

targets, were taken into account at their fair value. The fair

value of the individual earn-out obligations was calculated

as the respective present value of pay-out scenarios weighted

according to their probability.

The assets acquired include trade receivables with a fair

value of € 4,185 thousand as of the acquisition date. The

gross volume of the contractual receivables amounted to

€ 4,264 thousand.

Acquisition-related costs of € 439 thousand were incurred

and were recognized in other expenses in the income state-

ment in the reporting year and in the prior year.

in €‘000

Carrying amount before

revaluation

fair value as of acquisition

date


other assets (net of cash) 6,656 6,656

Cash and cash equivalents 2,494 2,494


non-current liabilities 158 4,272

Total net assets acquired 4,664 15,848

Interest in net assets acquired 15,848

Goodwill arising on acquisitions 16,221

Consideration transferred in the business combinations (cash consideration) 32,069

less fair value of contingent considerations 2,243

less cash acquired 2,494

Net cash paid for business combinations 27,332

T 10 neT asseTs aCquired, goodwill and purChase priCe of business CombinaTions in fisCal year 2011

114


in €‘000

Carrying amount before

revaluation

fair value as of acquisition

date


other assets (net of cash) 28,681 29,490

Cash and cash equivalents 8,339 8,339


non-current liabilities 1,373 16,710

Total net assets acquired 13,978 43,803

Interest in net assets acquired 40,553

Goodwill arising on acquisitions 58,556

Consideration transferred in the business combinations (cash consideration) 99,109

less fair value of contingent considerations 10,278

less cash acquired 8,339

Net cash paid for business combinations 80,492

Acquisitions contributed € 13,748 thousand to revenue

and € 1,377 thousand to the operating result of TÜV SÜD

in the past fiscal year. If the acquisitions had taken place

as of January 1, 2011, the entities acquired would have

contributed € 29,228 thousand to consolidated revenue and

€ 2,829 thousand to the Group’s operating result for the

twelve months ended December 31, 2011.

As of December 31, 2011, the calculation of the fair values

of the assets acquired, the liabilities and contingent liabilities

assumed and the goodwill for three out of seven business

combinations was not yet complete. This means that the

amounts presented are provisional.

The acquisitions described above are expected to result in

goodwill of € 1,101 thousand that will be tax deductible.

It is not possible to provide information on business combi-

nations with an acquisition date after the reporting date but

prior to completion of these financial statements, as audited

opening statements of financial position as of the acquisition

date are not yet available.

Business combinations in the 2010 fiscal year

In the fiscal year 2010, TÜV SÜD acquired 100% of the shares

in Global Risk Consultants Corp., Clark (headquarters), USA

(the »GRC group«). In addition, TÜV SÜD acquired seven other

entities that were not material individually.

As of the acquisition date, the acquisitions collectively

affected the consolidated financial statements as follows:

Hidden reserves totaling € 44,353 thousand were identified

in order backlog, customer relationships, databases, brands

and licenses at the acquirees and acquired operations. Order

backlog, customer relationships and databases are amortized

over a useful life of between one and 20 years. On a case-by-

case basis, we assume indefinite useful lives for licenses and

brands, as the licenses make up the basis of business in each

case and the brands will remain in use indefinitely.

The assets acquired included trade receivables with a fair

value of € 9,630 thousand as of the acquisition date. The

gross volume of the contractual receivables amounted to

€ 9,911 thousand.

Acquisition-related costs of € 1,053 thousand were incurred

and were recognized in other expenses in the income state-

ment in fiscal year 2010.

In fiscal 2011, there were no major adjustments to the presen-

tation of business combinations considered provisional as of

December 31, 2010.

T 11 neT asseTs aCquired, goodwill and purChase priCe of business CombinaTions in fisCal year 2010

115


Business disposals in the 2011 fiscal year

As of April 15, 2011, TÜV SÜD sold all shares in the Msource

group to the Italian CROM group. The activities of the Msource

group were reported in the consolidated financial statements

as of December 31, 2010 under discontinued operations or

non-current assets and disposal groups held for sale as well

as associated liabilities. The removal of the Msource group

(which was written down to an expected selling price of

€ 4,000 thousand as of December 31, 2010) from the scope of

consolidation led to income of € 370 thousand, which was

reported in the income statement as profit from discontinued

operations.

As part of the portfolio streamlining the fully consolidated

subsidiaries PSB Academy Pte. Ltd., Singapore (PSB Academy),

and PSB Technologies Pte. Ltd., Singapore (PSB Technologies),

were sold in June 2011. These transactions do not meet the

criteria in IFRS 5 for reporting discontinued operations. The

assets and liabilities of the entities were not reported under

non-current assets and disposal groups held for sale as of

December 31, 2010, as the entities were not yet available for

immediate sale in their condition at that time. Removing PSB

Academy from the scope of consolidation resulted in a gain

before selling costs of € 27,546 thousand in total, which is

reported under other income. The loss of € 923 thousand from

removing PSB Technologies from the scope of consolidation

is included in other expenses.

In fiscal 2011, TÜV SÜD also sold e4t electronics for transportation

s.r.o., Czech Republic (e4t), as well as Novo Quality Services

(Malaysia) Sdn. Bhd., Malaysia (Novo Quality Services), which

both were deconsolidated at the beginning of October 2011.

The assets and liabilities of both entities were reported in

non-current assets and disposal groups held for sale as well

as associated liabilities as of December 31, 2010. The gain

on deconsolidation of the two entities amounted to € 171 thousand

and is included in other income.

Based on the figures as of the respective selling date, the

disposals affected the consolidated financial statements of

TÜV SÜD AG as follows:

Business disposals in the 2010 fiscal year

There were no disposals in fiscal 2010.

T 12 deConsolidaTion effeCTs from disposals in 2011

in €‘000

msource

PsB academy

PsB technologies

other

total

intangible assets and property, plant and equipment 4,188 18,822 6,859 143 30,012

other assets (net of cash) 6,095 4,477 8,566 1,233 20,371

Cash and cash equivalents 1,094 4,657 6,389 700 12,840

Current liabilities 5,818 9,300 12,057 1,117 28,292

non-current liabilities 1,357 933 241 6 2,537

Total net assets disposed of 4,202 17,723 9,516 953 32,394

accumulated other comprehensive income –172 –3,310 –1,569 299 –4,752

non-controlling interests 0 0 0 –438 –438

Gain (+) / loss (-) on deconsolidation 370 27,546 –923 171 27,164

Sales prices 4,400 41,959 7,024 985 54,368

thereof settled by cash payments 4,400 41,959 6,577 985 53,921

116


4 | CONSOlIDATION PRINCIPlES

The consolidated financial statements are based on the

annual financial statements of TÜV SÜD AG and the subsidi-

aries included in consolidation, prepared in accordance

with uniform accounting policies.

The acquisition of subsidiaries and businesses is accounted

for using the acquisition method. The cost of a business

combination is measured based on the fair value of the assets

acquired and liabilities assumed or entered into as of the

acquisition date. The acquisition-related costs of a business

combination are accounted for as expenses in the periods in

which the costs are incurred. The identifiable assets acquired

and liabilities assumed (including contingent liabilities) in a

business combination are measured at their fair values at the

acquisition date regardless of the extent of any non-controlling

interests. Uniform accounting policies are used for this

purpose. Any adjustments of contingent consideration that

were reported as a liability at the time of the acquisition are

posted through the income statement. The only exception is for

adjustments within twelve months of the acquisition date if

more accurate findings lead to information on adjusting events

relating to the circumstances as of the transaction date. These

result in an adjustment of cost and thus of goodwill. Non-

controlling interests are measured either at the fair value of

assets acquired and liabilities assumed (full goodwill method)

or at the fair value of their proportionate share. After initial

recognition, profits and losses are allocated in proportion to

the shareholding and without restriction. Consequently non-

controlling interests may also have a negative balance. For

business combinations achieved in stages, the shares held are

remeasured at their fair value on the date control is obtained.

Revenue, expenses and income as well as receivables and liabilities

between consolidated entities are eliminated. Intercompany prof-

its from transactions within the Group are also eliminated.

5 | CuRRENCy TRANSlATION

All financial statements of consolidated entities that have been

prepared in foreign currency are translated into euro using

the functional currency concept. As the foreign subsidiaries

are independently operating entities, the functional currency

is considered to be the currency of the respective country in

which they are situated. Items of the statement of financial

position are therefore translated using the mean rate at the

end of the reporting period. This does not include equity, which

is translated using historical rates. Expense and income items

are stated using mean annual exchange rates. Exchange rate

differences are treated as other comprehensive income and

recognized under other reserves within equity.

In the subsidiaries’ separate financial statements, monetary

items in foreign currency are translated using the closing rate

as of the end of the reporting period, while non-monetary items

continue to be valued using the historical exchange rate as of

the date of the transaction. Differences resulting from such

translations are generally recognized in the income statement.

The exchange rates used to translate the most important

currencies developed as follows:

Closing rate annual average rate

dec. 31, 2011 dec. 31, 2010 2011 2010

us dollar (usd) 1.2939 1.3362 1.3916 1.3267

Pound sterling (GBP) 0.8353 0.8608 0.8678 0.8580

singapore dollar (sGd) 1.6782 1.7153 1.7485 1.8076

turkish lira (try) 2.4432 2.0694 2.3349 1.9982

T 13 seleCTed exChange raTes

117


6 | ACCOuNTING POlICIES

Revenue mainly consists of income from services and is

recorded as soon as the services have been provided.

Revenue from longer-term contracts is recognized pursuant

to IAS 18.20 using the percentage of completion method.

This involves recognizing costs and revenue in line with the

degree to which the contract has been completed. The

percentage of completion per contract to be recognized is

calculated as the ratio of the actual costs incurred to overall

anticipated costs of the project (»cost-to-cost method«). If

the result of a service contract cannot be determined reliably,

revenue is only recognized at the amount of the contract

costs incurred (»zero profit method«). Contract costs are rec-

ognized as expenses in the period in which they are incurred.

When it is probable that total contract costs will exceed

total contract revenue, the expected loss is recognized as

an expense immediately.

Own work capitalized is recognized for expenses incurred in

the past fiscal year for internally generated intangible assets

or self-constructed assets. Own work that can be capitalized

is recognized at cost and written down over the useful life

of the asset.

Contract-related goods and services are recognized as

purchased services.

Discontinued operations are reported as soon as a component

of an entity is classified as held for sale or has already

been disposed of and if the component represents a separate

major line of business or geographical area of operations,

or is part of a single coordinated plan to dispose of a separate

major line of business or geographical area of operations,

or is a subsidiary acquired exclusively with a view to resale.

The profit/loss from discontinued operations is reported

separately in the consolidated income statement and includes

both the earnings from the business activities and the sale

of the operations as well as the profits and losses from the

measurement of the operations at fair value less costs to sell

and the respective taxes incurred.

Intangible assets include goodwill as well as acquired and

internally generated intangible assets.

Goodwill arising on a business combination is recorded as

an asset when the Group obtains control (acquisition date).

It corresponds to the amount by which the acquisition cost

of a business combination exceeds the net fair value of the

identifiable assets, liabilities and contingent liabilities on the

date of the business combination. Goodwill is not subject

to amortization but is tested for impairment at least once a

year or whenever there is any indication of impairment, and

written down if appropriate (impairment only approach). This

impairment test is based on cash generating units (CGUs) and

compares the recoverable amount with the carrying amount.

Where the cash generating unit’s carrying amount exceeds

its recoverable amount, an impairment loss is recognized on

goodwill to account for the difference. Impairment losses

recognized on goodwill are not reversed. The cash generating

units correspond to the Group’s divisions which are managed

on a worldwide basis as of 2010. The recoverable amount

is the higher of fair value less costs to sell and value in use.

The fair value less costs to sell is derived from management’s

approved three-year plan, with the aid of the discounted

cash flow method. The key assumptions made in determining

fair value are the growth rates of the operating results in

the planning period, the CGU-specific cost of capital and the

forecast sustainable growth rate after the end of the planning

period. Cost of capital is based on the weighted average

cost of capital (WACC) of the TÜV SÜD Group adjusted for the

specific risks inherent in the cash flows budgeted for the

cash generating unit in question. The sustainable growth rate

used is the forecast long-term rate of the cash generating

unit’s market growth.

118


Other intangible assets acquired for a consideration, such as

software or accreditations, are valued at cost. This item also

includes assets such as customer relationships, brand name

rights and non-compete agreements identified in the course

of purchase price allocations.

Internally generated intangible assets, such as software or

development costs, are stated at cost if it is probable that the

economic benefits arising from the intangible asset will flow

to the entity and the costs can be measured reliably and that

both the technical feasibility and the sale or use of the newly

developed assets is guaranteed. Cost comprises the costs

directly and indirectly allocable to the development process.

Research costs are expensed as incurred.

Intangible assets with finite useful lives are amortized using

the straight-line method over a period of three to 20 years.

Intangible assets with an indefinite useful life are tested for

impairment each year instead of being amortized.

Property, plant and equipment are accounted for at cost

less accumulated depreciation and any impairment losses.

Depreciation is generally charged using the straight-line

method. Buildings and parts of buildings are depreciated over

a maximum period of 40 years, technical equipment over a

period of between five and 15 years, and furniture and fixtures

over a period of between eight and 13 years. If an asset

necessarily takes a substantial period of time to get ready for

its intended use, the borrowing costs directly attributable to

its production are capitalized as part of the respective asset.

Rented or leased property, plant and equipment that are

economically attributable to TÜV SÜD (finance leases) are

recognized in the statement of financial position at the lower

of the net present value of the minimum lease payments or the

fair value. The economic title to the leased asset is allocated

to the lessee in cases in which it bears substantially all risks

and rewards incidental to ownership of the leased asset. The

leased asset is depreciated over the shorter of the lease term

and its useful life. Net rental payments made under operating

leases are charged to the income statement over the term of

the lease.

TÜV SÜD’s investment properties that are mainly held for

rental to third parties are stated at cost less accumulated

depreciation. Buildings and parts of buildings are depreciated

using the straight-line method over a maximum period of

40 years.

At each reporting date, the Group assesses whether there is

any indication that the carrying amounts of intangible assets,

property, plant and equipment and investment property may

be subject to impairment. If any such indication exists, an

impairment test is performed. For this purpose, the recoverable

amount is determined for the asset concerned, which is the

higher of its fair value less costs to sell and its value in use.

Value in use is the present value of the expected future cash

flows. If it is not possible to determine the recoverable

amount for an individual asset, the recoverable amount is

determined for the smallest identifiable group of assets (cash

generating unit) to which the asset can be allocated and

which generates cash inflows that are largely independent

of the cash inflows from other (groups of) assets. If the

recoverable amount of an asset is less than its carrying

amount, the carrying amount is reduced and the impairment

loss is recognized immediately in the income statement. For

all assets other than goodwill, the following rule applies: if the

recoverable amount of the asset or cash generating unit

increases again after recognition of the impairment loss, the

impairment loss is reversed. However, the asset’s or cash

generating unit’s carrying amount must not exceed the

carrying amount that would have been determined net of

amortization or depreciation had no impairment loss been

recognized. A reversal of an impairment loss is recognized

immediately in the income statement.

119


Investments accounted for using the equity method are

recognized at cost upon acquisition. In subsequent periods,

the carrying amounts of equity investments in associated

companies or joint ventures are increased or decreased

each year by the proportionate net income, distributed

dividends or other changes in equity, in accordance with the

equity method. The principles of purchase price allocation

for full consolidation are applied by analogy to the first-time

measurement of investments accounted for using the equity

method. Any goodwill is assessed in connection with impair-

ment tests for the equity investment (IAS 39) or joint venture.

Goodwill is not amortized. Interim financial statements for

periods ended no more than three months prior to the end of

the reporting period are used for the measurement of invest-

ments accounted for using the equity method which have a

diverging fiscal year.

Other financial assets particularly include shares in non-

consolidated affiliated companies, participations, loans and

securities. Pursuant to IAS 39, financial assets are divided

into the following categories »at fair value through profit or

loss«, »available for sale«, and »held to maturity«. The fourth

category is »loans and receivables« originated by the entity.

By definition, the category of »financial assets at fair value

through profit or loss« includes derivative financial instruments

for which no hedge accounting is applied. TÜV SÜD does

not use this category for any other financial instruments. There

are also no financial instruments that are held to maturity by

TÜV SÜD. The »available-for-sale financial assets« category

includes shares in non-consolidated affiliated companies,

participations and non-current and current securities. They

are measured at fair value. The unrealized gains and losses

resulting from valuation are posted directly to other reserves

within equity, taking deferred taxes into account. The reserve

is released to income, either upon disposal or when the fair

value falls permanently below cost. The fair value of traded

securities corresponds to their market value. In the absence

of a market value for shares in affiliated companies and par-

ticipations, they are measured at amortized cost. Loans fall

under the category of »loans and receivables«, and are stated

at amortized cost.

Deferred tax assets and liabilities are recognized for temporary

differences between the carrying amounts in the IFRS statement

of financial position and the tax basis of the assets and

liabilities, as well as for consolidation measures with an effect

on income. In addition, taxes are deferred for tax loss

carryforwards provided the realization of such carryforwards

is sufficiently certain. Deferred taxes are calculated on

the basis of the anticipated tax rates at the time of realization.

Deferred tax assets and liabilities are netted out for each

entity and/or tax group.

Inventories are valued at the lower of cost or net realizable

value.

Trade receivables are valued at cost less any impairment

losses. In some cases, impairment losses are recognized

using an allowance account. The decision of whether to account

for a default risk by using an allowance account or by directly

writing down the receivable depends upon the ability to

reliably estimate the risk involved. Specific and portfolio-based

allowances are generally recognized in proportion to the

anticipated default risk.

Trade receivables from unbilled service contracts are

accounted for using the percentage-of-completion method in

accordance with IAS 18.20. Anticipated losses from ongoing

contracts are taken into account if they can be reliably

estimated, and are directly deducted from the corresponding

receivables. Any negative balance is posted to liabilities

according to the percentage-of-completion method. Advance

payments received for client orders are stated without

offsetting in current liabilities.

120


Other receivables and other assets are valued at cost less

valuation allowances. Specific valuation allowances are

recognized in relation to the anticipated default risks.

Derivative financial instruments are mainly used to hedge

interest and exchange rate risks. The range of instruments

used comprises forward exchange transactions, combined

interest rate and currency swaps as well as interest rate

swaps. Derivative financial instruments are held without an

intention to sell and serve to hedge underlying transactions.

They are recognized as an asset or liability when the transaction

is entered into and are subsequently generally measured

at fair value in accordance with the categories set forth in

IAS39. Derivative financial instruments are measured using

generally accepted valuation techniques and instrument-

specific market parameters. The input parameters used in the

net present value models are the relevant market prices and

interest rates as of the reporting date.

Hedge accounting is only used for significant transactions

in the TÜV SÜD Group. With respect to existing cash flow

hedges that are used to hedge against risks from fluctuation

in future cash flows, the effective portion of the change in

fair value of the derivative is initially recognized in other

comprehensive income. Where hedge effectiveness is outside

the range of 80% to 125%, the hedging relationship is released.

The ineffective part, as well as changes in the market value of

derivatives that do not meet the criteria of hedge accounting,

are recorded directly in the income statement.

Cash and cash equivalents contain cash on hand and other

liquid financial assets with an original term to maturity of no

more than three months. They are recognized at nominal value.

Non-current assets and disposal groups held for sale relate

to assets that can be sold in their present condition and whose

sale is highly probable. The management must be committed

to a plan to sell the asset. The sales transaction is expected

to be completed within one year from classification. This can

involve individual non-current assets, groups of assets

(disposal groups) or components of an entity (discontinued

operations). Liabilities to be sold together with assets in a

single transaction are part of a disposal group or discontinued

operations and are reported separately as liabilities associated

with non-current assets and disposal groups held for sale.

Non-current assets held for sale are no longer amortized or

depreciated. Instead they are stated at their fair value less

costs to sell from the date of classification provided that this

is lower than the carrying amount.

Provisions for pensions and similar obligations are valued

using the actuarial projected unit credit method for defined

benefit pension plans. The amount shown on the statement

of financial position represents the current value of the pension

obligation after offsetting the fair value of plan assets as of

the reporting date. The calculation is based on actuarial reports

and biometric assumptions. Actuarial gains and losses are

recognized in full in the fiscal year in which they occur. They

are charged directly against revenue reserves, taking deferred

taxes into account, and reported outside of the income

statement as a component of other comprehensive income in

the statement of comprehensive income. They do not affect

the income statement in the subsequent periods either. The

interest portion of pension expenses and the expected return

on plan assets are posted to the financial result.

Other provisions are recorded if the obligation to a third party

results from a past event which is expected to lead to an

outflow of economic benefits and their value can be determined

reliably. They are valued using the best estimate of the

settlement value, and cannot be offset against reimbursement

claims. Provisions due in more than one year are discounted

where the effect of the time value of money is material.

Provisions for restructuring measures are recognized to

the extent that a detailed formal restructuring plan has been

prepared and communicated to the parties concerned.

121


Financial debt is measured at amortized cost using the effec-

tive interest method. Transaction costs are also taken into

account when determining acquisition cost. Liabilities from

finance leases are stated at the lower of the fair value of

the leased asset or the present value of the minimum lease

payments.

Trade payables and other liabilities are recognized at amor-

tized cost, except for derivative financial instruments.

Contingent liabilities are possible obligations that arise from

past events and whose existence will be confirmed only by

the occurrence or non-occurrence of one or more uncertain

future events not wholly within the control of the TÜV SÜD Group.

A present obligation also constitutes a contingent liability

when an outflow of resources embodying economic benefits

is not sufficiently probable in order to recognize a provision

or the amount of the obligation cannot be measured with

sufficient reliability. Contingent liabilities are not recorded

in the statement of financial position; they are disclosed

in the notes to the financial statements instead. The carrying

amounts are based on a best estimate of the expenses

expected to meet the contingent liability.

estimates

The preparation of the consolidated financial statements

requires that assumptions or estimates be made for some

items which have an effect on the values reported in the

statement of financial position, the disclosure of contingent

liabilities and the recognition of income and expenses. This

particularly relates to the measurement parameters for pension

obligations and other provisions, goodwill and deferred tax

assets recognized on tax loss carryforwards. Actual amounts

may differ from the estimates.

Goodwill is tested for impairment at least once a year. Key

estimate parameters include the sustainable long-term

growth rates as well as the cash flows allocable to cash

generating units and the risk adjustment per cash generating

unit of the TÜV SÜD Group’s weighted average cost of capital.

A 10% reduction in the cash flows used to calculate the cash

generating unit’s fair value less costs to sell would not result

in an impairment loss within the continuing operations. The

same applies for an increase in the weighted average cost of

capital by one percentage point or a decrease in the sustainable

growth rate by one percentage point.

The defined benefit obligations and the pension expenses

for the subsequent year are calculated using the actuarial

parameters given in note 30. As in the prior year, the discount

rate in Germany is calculated in accordance with the procedure

developed by the Group’s global actuary Towers Watson

Deutschland GmbH, Wiesbaden, to determine the discount

rate for the measurement of pension obligations (»global rate

link«).

Increasing or decreasing the discount rate by 0.5% would

result in a decrease/increase in pension obligations by

€ 77 million/€ 85 million. Discrepancies between the anticipated

development of salaries and pensions and actual collective

wage increases and between expected and actual return

on plan assets in the respective fiscal year would produce a

much lower effect. Such a change of the parameters would,

however, have no impact on the consolidated net income for

the year, as actuarial gains and losses are immediately posted

directly to equity.

In the case of other items of the statement of financial position,

a change to the original basis for estimation results in a change

to the respective item, with an effect on income.

restatement of prior-year figures

Individual prior-year figures were restated in their present

format for better comparability.

122


In the statement of financial position as of December 31, 2011,

actuarial gains and losses from defined benefit pension plans

after taxes were allocated directly to revenue reserves in

accordance with IAS 19.93D. The corresponding prior-year

amount of € 57,610 thousand was reclassified from other

reserves to revenue reserves within equity.

To increase transparency, a couple of lines have been added

to the statement of cash flows. The prior-year presentation

was adjusted to the presentation used in the reporting year.

accounting standards adopted for the first time

in the reporting year

The amendments to IAS 24 introduced an option for exemption

from disclosing transactions with certain related parties and

adjusted the definition of a related party. The TÜV SÜD Group

is not affected by the new exemption option. Neither has

the group of TÜV SÜD AG’s related parties changed as of the

reporting date based on the new definition.

Apart from minor content changes, the regulations from

the annual improvement project (2008–2010) mainly include

clarifications on recognition, measurement and presentation

of financial statements items. The changes do not have any

material impact on TÜV SÜD AG’s consolidated financial

statements.

The other new accounting standards are not relevant for

the consolidated financial statements of TÜV SÜD AG as of

December 31, 2011.

new accounting standards that are not yet mandatory

The application of the following standard, which was issued

by the IASB and adopted by the EU prior to the preparation of

TÜV SÜD’s consolidated financial statements, is only mandatory

for reporting periods beginning on or after July 1, 2011.

TÜV SÜD decided not to early adopt this standard on a

voluntary basis.

standard / interpretation Effective dateanticipated impact on tÜV sÜd aG‘s consolidated financial statements

amendments to ifrs 7 »financial instruments: disclosures« – transfers of financial assets

July 1, 2011

no significant consequences are expected for the consolidated financial statements.

T 14 new aCCounTing sTandards and inTerpreTaTions ThaT are noT yeT mandaTory

123


The main amendment to IAS 19 »Employee Benefits« is the

abolition of the option when recognizing unexpected fluctuations

in pension obligations and plan assets, referred to as actuarial

gains and losses. In the past, these could either be taken into

account in the income statement, in other comprehensive

income without effect on income, or in a subsequent period

using what was referred to as the corridor method. In future,

immediate recognition in other comprehensive income is the

only permissible method. This new regulation does not have

any effect on TÜV SÜD, as the prescribed method is already

used in the consolidated financial statements.

In addition, the expected return on plan assets is currently

calculated based on the subjective expectations of management

when calculating the value of the investment portfolio. IAS 19

(revised 2011) now only provides for a standardized return

on plan assets at the current discount rate for pension

obligations. TÜV SÜD only expects minor effects from this

amendment.

Furthermore, additional disclosures on the characteristics of

the pension plans and the associated risks for the entity are

required.

standard / interpretation Effective dateanticipated impact on tÜV sÜd aG‘s consolidated financial statements

amendments to ias 1 »Presentation of financial statements« – Presentation of items of other Comprehensive income

July 1, 2012

the presentation of the items of other comprehensive income will be adjusted.

amendments to ias 12 »deferred tax« – recovery of underlying assets

January 1, 2012

no consequences are expected for the consolidated financial statements.

amendments to ias 19 »employee Benefits« January 1, 2013 the effects are currently under review.

amendments to ias 27 »separate financial statements«

January 1, 2013


amendments to ias 28 »investments in associates and Joint Ventures«

January 1, 2013


amendments to ias 32 »financial instruments: Presenta-tion« – offsetting financial assets and financial liabilities

January 1, 2014


Change to ifrs 1 »first-time adoption of international financial reporting standards« - severe hyperinflation and removal of fixed dates for first-time adopters

July 1, 2011


amendments to ifrs 7 »financial instruments: disclosures« – offsetting financial assets and financial liabilities

January 1, 2013


ifrs 9 »financial instruments: Classification and measurement" January 1, 2015 the effects are currently under review.

ifrs 10 »Consolidated financial statements« January 1, 2013 the effects are currently under review.

ifrs 11 »Joint arrangements« January 1, 2013 the effects are currently under review.

ifrs 12 »disclosures of interests in other entities« January 1, 2013 the effects are currently under review.

ifrs 13 »fair Value measurement« January 1, 2013 the effects are currently under review.

ifriC 20 »stripping Costs in the Production Phase of a surface mine«

January 1, 2013


T 15 new aCCounTing sTandards and inTerpreTaTions noT yeT adopTed by The eu ThaT are noT yeT mandaTory

The table below shows those standards, interpretations and

amendments to existing standards issued by the IASB which

have not yet been adopted by the EU and which are therefore

not applicable for IFRS financial statements prepared pursuant

to Section 315a HGB.

124


IFRS 9 »Financial Instruments« is the result of the first of three

phases of the project to replace IAS 39. IFRS 9 amends the

recognition and measurement rules for financial instruments.

In future, financial assets will be classified and measured in

just two groups: at amortized cost and at fair value. The rules

for financial liabilities will be more or less taken from IAS 39

without change. The final regulations on impairment of

financial instruments and hedge accounting (phases two and

three) are still outstanding. The adoption of IFRS 9 will have

an effect on the accounting for financial instruments, which is

reviewed on a continuous basis. There are no plans for early

adoption of this standard.

Three new standards on consolidation and joint arrangements

were issued as IFRS 10 »Consolidated Financial Statements«,

IFRS 11 »Joint Arrangements« and IFRS 12 »Disclosures of

Interests in Other Entities«. At the same time, amended versions

of IAS 27 »Separate Financial Statements« and IAS 28 »Invest-

ments in Associates and Joint Ventures« were also issued.

IFRS 10 redefines the concept of control in detail. This new

standard could have an effect on the scope of consolidation;

this potential effect is currently being reviewed.

IFRS 11 provides new rules for accounting for jointly controlled

activities. Based on the new concept, it is necessary to distin-

guish between a joint operation and a joint venture. In the

case of joint operations, the individual rights and obligations

must be recognized in the consolidated financial statements

in relation to the interest held in the arrangement. By contrast,

investments in joint ventures must be accounted for using

the equity method. This new regulation is not expected to have

any effects, but a conclusive review is still needed.

IFRS 12 extends the existing disclosure requirements in relation

to interests in other entities and summarizes these in one

standard.

IFRS 13 »Fair Value Measurement« contains a definition of fair

value as well as rules on how to calculate fair value if other

IFRSs prescribe measurement at fair value. The new standard

can lead to fair values that differ from those calculated using

previous standards.

125


notes to the Consolidated inCome statement

7 | REVENuE

Consolidated revenue was generated by the individual

divisions and regions as follows:

Revenue relates mainly to service contracts recognized using

the percentage-of-completion method.

In 2011, the TÜV SÜD Life Services division was moved from

»Other« to the strategic business segment MOBILITY. In

addition, within the CERTIFICATION strategic business

segment, Food was reclassified from the TÜV SÜD

Management Services division to the TÜV SÜD Product

Services division. The respective prior-year figures were

restated accordingly.

in €‘000 2011 2010*

tÜV sÜd industry services 469,624 422,782

tÜV sÜd real estate services 156,478 146,987

tÜV sÜd rail 38,267 29,933

Total INDuSTRy 664,369 599,702

tÜV sÜd auto services 490,870 451,713

tÜV sÜd automotive 50,206 46,494

tÜV sÜd life services 52,046 53,284

Total mOBIlITy 593,122 551,491

tÜV sÜd Product services 246,986 226,910

tÜV sÜd management services 111,367 103,516

tÜV sÜd academy 59,522 68,628

Total CERTIFICATION 417,875 399,054

other 2,373 2,237

1,677,739 1,552,484

* Prior-year figures restated

in €‘000 2011 2010

Germany 1,097,410 1,039,955

western euroPe 151,539 139,202

Central & eastern euroPe 58,626 59,014

middle east/afriCa 19,602 9,837

asia PaCifiC 212,525 194,383

ameriCas 138,037 110,093

1,677,739 1,552,484

T 16 revenue by division

T 17 revenue by region

126


8 | PERSONNEl ExPENSES

T 18 personnel expenses

in €‘000 2011 2010

wages and salaries 797,455 728,455

social security contributions and other benefit costs

104,267

98,507

retirement benefit costs 69,838 59,245

incidental personnel costs 14,593 13,846

986,153 900,053

Personnel expenses include expenses totaling € 10,658 thou-

sand (prior year: € 12,597 thousand) for leasing civil servants

from the German state of Hesse. These employees are

assigned the same operational tasks as employees of TÜV

Technische Überwachung Hessen GmbH, Darmstadt, in the

review of plant and equipment requiring inspection and in

vehicle inspections and driving tests under the accreditation

which authorizes TÜV SÜD to operate the road vehicle tech-

nical inspectorate and the official vehicles inspection body.

The rise in wages and salaries including social security

and other benefit costs is a result of the expansion of the

workforce in Germany and other countries, due among

other things to changes in the scope of consolidation, and

also of collective wage increases which became effective

in the reporting period.

Retirement benefit costs also include employer contributions

to state pensions. The year-on-year rise is mainly due to the

fact that the prior-year expense was reduced by € 9,062 thou-

sand on account of a special effect from the pronouncement

of the »Gesetz zum Neuen Dienstrecht in Bayern« [Act

on New Public Sector Employment Law in Bavaria], which

provides for a higher retirement age for civil servants in

Bavaria.

The TÜV SÜD Group had an average headcount of 16,018

employees in the reporting year (prior year: 14,874 employees).

Of the prior-year figure, 212 employees were accounted for

by discontinued operations. The Group’s workforce mainly

comprises salaried employees.

9 | AmORTIzATION, DEPRECIATION AND

ImPAIRmENT lOSSES

T 19 amorTizaTion, depreCiaTion and impairmenT losses

in €‘000 2011 2010

amortization and depreciation

of intangible assets 13,667 14,443

of property, plant and equipment 38,093 35,839

of investment property 99 92

impairment losses 527 4,186

52,386 54,560

The impairment losses relate to brands and customer

relationships acquired in the course of business combinations.

The prior-year figure stemmed primarily from write-downs to

lower fair value for land and buildings in Germany.

127


10 | OThER ExPENSES

in €‘000 2011 2010

rental and maintenance expenses 71,964 65,429

travel expenses 71,230 62,581

Cost of purchased administrative services 31,202 29,315

telecommunication costs 18,033 18,520

marketing costs 17,294 16,817

fees, contributions, consulting and audit costs 17,177 13,096

it costs 16,459 14,881

other taxes 7,371 6,613

impairment losses on trade receivables (including amounts derecognized) 4,533 5,640

miscellaneous other expenses 63,239 57,515

318,502 290,407

in €‘000 2011 2010

income from the deconsolidation of PsB academy 27,546 0

income from the reversal of provisions 6,673 7,484

income from other transactions not typical for the company 4,244 3,943

Currency translation gains 4,129 3,624

Gain on the disposal of non-current assets 2,639 1,536

reimbursements under the German phased retirement scheme 1,038 1,634

miscellaneous other income 19,223 17,858

65,492 36,079

T 20 oTher expenses

T 21 oTher inCome

11 | OThER INCOmE

A figure of € 1,620 thousand of other expenses relates to

costs incurred in connection with the sale of the two

subsidiaries PSB Academy and PSB Technologies as well

as the loss on deconsolidation of PSB Technologies amounting

to € 923 thousand.

The increase in other income is essentially due to the gain on

deconsolidation of PSB Academy.

Miscellaneous other income encompasses a large number of

individual matters. Among other things, the prior-year figure

included income of € 4,208 thousand from the transfer of plan

assets to TÜV SÜD Pension Trust e.V., in the course of which

the land and buildings of Armat Südwest GmbH Co.KG were

written up to fair value.

12 | GOVERNmENT GRANTS

In the reporting period, government grants totaling

€ 1,409 thousand (prior year: € 1,005 thousand) were

released to income. The grants are not contingent on

any further conditions being met.

128


13 | FINANCIAl RESulT

T 22 finanCial resulT

The drop in income from investments accounted for using the

equity method from € 6,482 thousand to € 1,472 thousand is

primarily due to the lower proportionate net income of € 607 thou-

sand generated by the Turkish joint venture companies (prior

year: € 4,482 thousand). In particular, this is because of negative

exchange rate effects from the devaluation of the Turkish lira

against the US dollar and euro. ATISAE Asistencia Técnica

Industrial S.A.E., Spain, is no longer accounted for using the

equity method since January 1, 2011. In the prior year, the entity

contributed € 1,470 thousand to the income from investments

accounted for using the equity method.

The total interest income from assets and liabilities not measured

at fair value through profit or loss amounted to € 4,670 thousand

(prior year: € 5,796 thousand). The corresponding total interest

expense amounted to € 4,233 thousand in the fiscal year 2011

(prior year: € 6,023 thousand). It also includes costs of

€ 774 thousand (prior year: € 2,156 thousand) for the credit line.

Net finance costs for pension provisions consist of interest

costs for pension and termination benefit obligations

amounting to € 63,496 thousand (prior year: € 64,395 thousand)

and an expected return on plan assets totaling € 40,330 thou-

sand (prior year: € 45,858 thousand).

The income/loss from participations chiefly includes the gain

on disposal of the participation in James Cook Australia

Institute of Higher Learning Pte. Ltd., Singapore (JCU), amount-

ing to € 7,573 thousand. The finance costs from participations

relate first and foremost to the impairment of the interests

in the ATISAE group totaling € 12,500 thousand. These

impairment losses were recognized to account for the

effects of the economic crisis in Spain on business develop-

ment and business outlook of the participation. In addition,

the consequences of the financial crisis had a negative

impact on the returns of Spanish government bonds and thus

on the cost of capital used for measurement purposes.

in €‘000 2011 2010

Income from investments accounted for using the equity method 1,472 6,482

interest income from securities 2,642 2,531

interest income from loans 29 1,049

other interest and similar income 1,999 2,216

Interest income 4,670 5,796

net finance costs for pension provisions –23,166 –18,537

interest cost from finance leases –188 –186

other interest and similar expenses –4,045 –5,837

Interest expenses –27,399 –24,560

income/loss from participations

financial income from participations 8,767 2,481

finance costs from participations –13,318 –4,551 –1,138 1,343

Currency translation gains/losses from financing measures

Currency translation gains 7,243 4,774

Currency translation losses –10,844 –3,601 –5,472 –698

sundry financial result

sundry financial income 327 0

sundry finance costs –1,034 –707 –2,200 –2,200

Other financial result –8,859 –1,555

–30,116 –13,837

129


14 | INCOmE TAxES

Current tax expenses for the fiscal year 2011 include income

of € 541 thousand for current taxes from prior periods (prior

year: expenses of € 407 thousand).

The following reconciliation for the TÜV SÜD Group presents

a summary of the individual entity-specific reconciliations

prepared using the respective local tax rates taking consoli-

dation entries into account. The expected income tax expense

from continuing operations is reconciled to the effective

income tax expense from continuing operations as reported.

T 24 Tax reConCiliaTion

in €‘000 2011 2010

Profit/loss from continuing operations before income taxes 133,612 123,366

expected tax rate 30.2% 30.2%

Expected income tax expense 40,351 37,257

tax rate differences –8,457 –491

tax reductions due to tax-free income –9,160 –4,805

tax increases due to non-deductible expenses 10,673 5,498

tax effect on accounting for associated companies and joint ventures using the equity method –445 –1,876

Current and deferred taxes for prior years 622 47

Changes in valuation allowances on deferred taxes and unrecognized deferred tax assets on tax loss carryforwards

–7,245

188

effect of changes in tax rate 241 –76

other differences 285 –549

Income tax expense from continuing operations as presented in the income statement 26,865 35,193

Effective tax rate 20.1% 28.5%

T 23 inCome Taxes

in €‘000 2011 2010

Current taxes 26,335 37,833

deferred taxes

on temporary differences 7,340 –2,935

on tax loss carryforwards –6,810 530 295 –2.640

26,865 35,193

Currency translation gains/losses from financing measures

stem from the measurement as of the reporting date of loans

in foreign currency and the corresponding hedging effects.

The measurement of the US dollar loan of TÜV SÜD Bursa A.S.,

Osmangazi-Bursa, Turkey (TÜV SÜD Bursa), led to a currency

translation loss of € 3,464 thousand (prior year: loss of

€ 470 thousand). For better transparency, for the first time the

currency gains/losses from financing measures are shown

separately within the other financial result.

In particular, the sundry financial result contains impairment

losses on loans.

130


The rise in tax rate differences and tax-free income compared

to the prior year is attributable in the main to the gains on

disposal of subsidiaries and participations.

The tax-neutral impairment of the interests in the ATISAE

group is responsible for the higher tax increases due to

non-deductible expenses.

Valuation allowances on deferred taxes on tax loss carryforwards

of € 9,684 thousand were reversed in the current period, as

it has become probable that these loss carryforwards can be

used in future.

The expected tax rate of 30.2% (prior year: 30.2%) is unchanged

in its components compared to the prior year and results from

applying the German corporate income tax rate of 15.0% plus

the solidarity surcharge of 5.5% and a trade tax rate of 14.4%

based on an average trade tax multiplier of 410%.

Deferred taxes are generally recognized based on the tax rates

applicable at each individual entity. For convenience, a uniform

tax rate of 30.2% (prior year: 30.2%) is used to calculate deferred

taxes on consolidation entries with effect on net income.

Deferred tax assets and liabilities result from the following items

of the statement of financial position and tax loss carryforwards:

Deferred taxes amounting to € 40,053 thousand (prior year:

€ 37,311 thousand) were charged directly to equity. They

are deferred taxes that were recognized on actuarial gains

and losses for pension provisions, the fair value reserve

for available-for-sale financial assets and cash flow hedges.

The deferred tax effect recognized in other comprehensive

income reduced equity by € 2,742 thousand in the fiscal year

2011 (prior year: increased equity by € 11,777 thousand).

Valuation allowances are recorded on deferred tax assets

if the future realization of the corresponding tax benefits is

unlikely. The taxable income considered likely on the basis of

the respective entity’s planning for the subsequent years is

taken as the basis for the assessment.

As of the reporting date, the TÜV SÜD Group held tax loss

carryforwards in Germany for corporate income tax and

solidarity surcharge amounting to € 57,041 thousand (prior year:

€ 56,953 thousand) and for trade tax of € 46,823 thousand

(prior year: € 46,540 thousand). No deferred taxes were

recognized on corporate income tax loss carryforwards of

€ 26,110 thousand (prior year: € 54,611 thousand) and trade

tax loss carryforwards of € 16,002 thousand (prior year:

€ 44,199 thousand), because realization is not expected at

present. These loss carryforwards can be carried forward

for an indefinite period. Tax loss carryforwards in other

countries amount to € 21,044 thousand as of December 31,

2011 (prior year: € 16,577 thousand). No deferred taxes were

recognized on tax loss carryforwards in other countries of

€ 11,155 thousand (prior year: € 2,947 thousand). Of these tax

T 25 deferred Taxes by iTem of The sTaTemenT of finanCial posiTion

deferred tax assets deferred tax liabilities

in €‘000 dec. 31, 2011 dec. 31, 2010 dec. 31, 2011 dec. 31, 2010

non-current assets 6,356 6,613 53,693 46,827

Current assets 2,135 944 10,436 13,596

non-current liabilities

Pension provisions 66,527 72,062 122 188

other non-current liabilities 5,189 6,022 4,027 4,359

Current liabilities 16,682 20,965 1,253 1,070

96,889 106,606 69,531 66,040

offsetting per tax group –40,904 –42,851 –40,904 –42,851

Deferred taxes on temporary differences 55,985 63,755 28,627 23,189

deferred taxes on tax loss carryforwards 20,955 20,277

Valuation allowances recognized on deferred taxes on tax loss carryforwards –9,002 –15,482

67,938 68,550 28,627 23,189

131


loss carryforwards, € 4,051 thousand (prior year: € 1,957 thou-

sand) can be used indefinitely and € 4,608 thousand (prior year:

€ 821 thousand) will be lost in five years or more.

Differences on investments in subsidiaries totaling

€ 8,396 thousand (prior year: € 4,847 thousand) did not give

rise to deferred tax liabilities because the differences are not

expected to reverse in the near future by way of realization

(distribution or sale of the entity).

15 | PROFIT/lOSS FROm DISCONTINuED OPERATIONS

The Msource group, reported under discontinued operations

since the prior year, was sold in April 2011. The profit/loss from

discontinued operations reported in the consolidated income

statement relates to the following earnings components of

the Msource group:

in €‘000 2011 2010

revenue 4,519 21,163

expenses/income –4,507 –30,323

Income/loss before taxes 12 –9,160

income taxes 69 283

Net income/loss for the period from discontinued operations 81 –8,877

Gain (+)/loss (–) on fair value measurement less costs to sell 370 –4,900

income taxes on fair value measurement less costs to sell 0 221

451 –13,556

in €‘000 2011 2010

Cash flow from operating activities of discontinued operations 4 –110

Cash flow from investing activities of discontinued operations 0 –80

Cash flow from financing activities of discontinued operations –101 –9

–97 –199

The profit from discontinued operations of € 451 thousand

(prior year: loss of € –13,556 thousand) is allocable to the

owners of TÜV SÜD AG in full.

The net change in cash and cash equivalents reported in the

statement of cash flows includes the following changes that

relate to the discontinued operations of the Msource group:

16 | NON-CONTROllING INTERESTS

The non-controlling interests of € 6,732 thousand (prior year:

€ 5,641 thousand) in the net income for the year are primarily

attributable to profit shares in Jiangsu TÜV Product Service

Ltd., Wuxi, China, and TÜV Technische Überwachung Hessen

GmbH, Darmstadt.

T 26 profiT/loss from disConTinued operaTions (afTer Taxes)

T 27 Cash flow from disConTinued operaTions

132


notes to the Consolidated statement of ComPrehensiVe inCome

17 | DEFERRED TAxES RElATING TO OThER

COmPREhENSIVE INCOmE

Deferred taxes relating to the components of other

comprehensive income developed as follows:

2011 2010

in €‘000 Before taxdeferred tax

expense/income after tax Before taxdeferred tax

expense/income

after tax

actuarial gains and losses from defined benefit pension plans and similar obligations

–22,965

–2,916

–25,881

–30,453

11,395

–19,058

available-for-sale financial assets 523 –158 365 –432 130 –302

Currency translation of foreign subsidiaries

–4,125

0

–4,125

16,699

0

16,699

Cash flow hedges –991 339 –652 –703 252 –451

investments accounted for using the equity method

34

–7

27

0

0

0

Other comprehensive income –27,524 –2,742 –30,266 –14,889 11,777 –3,112

Actuarial gains and losses from defined benefit pension plans

after tax include non-controlling interests of € –295 thousand

(prior year: € –472 thousand).

T 28 deferred Taxes relaTing To oTher Comprehensive inCome

133


notes to the Consolidated statement of finanCial Position

18 | INTANGIBlE ASSETS

T 29 developmenT of inTangible asseTs

Purchased intangible assets

in €‘000

Goodwill

licenses and similar rights

and customer relationships

other

intangibleassets

internally generated intangible

assets

intangible

assets under development

Total

cost

As of January 1, 2010 110,894 59,680 54,142 3,238 1,013 228,967

Currency translation differences 4,797 1,614 385 132 –3 6,925

Change in scope of consolidation 2,885 21 478 0 0 3,384

acquisitions of subsidiaries 58,556 44,060 2,905 0 0 105,521

additions 1,072 4,244 9,992 334 1,134 16,776

disposals –3,761 –1,202 –7,446 0 –40 –12,449

reclassifications to »held for sale« –12,167 –7,038 –571 0 0 –19,776

reclassifications –4 0 1,086 37 –741 378

As of December 31, 2010/January 1, 2011

162,272

101,379

60,971

3,741

1,363

329,726

Currency translation differences 3,121 –2,185 85 –67 –1 953

Change in scope of consolidation –16,987 –16,631 –794 –788 0 –35,200

acquisitions of subsidiaries 15,648 15,903 19 0 0 31,570

additions 264 147 2,903 787 4,140 8,241

disposals –1 –39 –117 2 –37 –192

reclassifications 0 0 236 395 –624 7

As of December 31, 2011 164,317 98,574 63,303 4,070 4,841 335,105

amortization

As of January 1, 2010 27,232 20,245 42,923 1,710 0 92,110

Currency translation differences 1,855 2,684 256 112 0 4,907

Change in scope of consolidation 0 1 283 0 0 284

acquisitions of subsidiaries 0 0 2,783 0 0 2,783

amortization 0 7,505 7,057 603 0 15,165

impairment losses 8,000 0 60 0 0 8,060

disposals –2,420 –387 –6,553 0 0 –9,360

reclassifications to »held for sale« –8,000 –2,554 –456 0 0 –11,010

reclassifications 0 342 –498 2 0 –154

As of December 31, 2010/ January 1, 2011

26,667

27,836

45,855

2,427

0

102,785

Currency translation differences 834 –261 49 –38 0 584

Change in scope of consolidation 0 –12,388 –390 –792 0 –13,570

acquisitions of subsidiaries 0 0 6 0 0 6

amortization 0 6,470 6,709 488 0 13,667

impairment losses 0 527 0 0 0 527

disposals 0 –39 –562 0 0 –601

As of December 31, 2011 27,501 22,145 51,667 2,085 0 103,398

Carrying amount as of December 31, 2011 136,816 76,429 11,636 1,985 4,841 231,707

Carrying amount as of December 31, 2010 135,605 73,543 15,116 1,314 1,363 226,941

134


The carrying amounts of goodwill are principally allocated to

the following cash generating units:

T 30 goodwill

in €‘000 dec. 31, 2011 dec. 31, 2010

industry services 79,973 76,908

auto services 15,705 10,414

Product services 16,484 22,187

academy 645 12,013

real estate services 12,356 2,416

other 11,653 11,667

136,816 135,605

The item »licenses and similar rights and customer relationships«

includes expenses of € 17,466 thousand for the license

for regular vehicle inspections by TÜV SÜD Bursa, Turkey

(prior year: € 21,811 thousand). The operator’s license is

amortized over its term until August 2027 using the straight-

line method.

The carrying amount of the licenses and brands with indefi-

nite useful lives acquired when purchasing the GRC group

totals € 8,114 thousand as of the reporting date (prior year:

€ 7,916 thousand).

Impairment losses were recognized according to the »impair-

ment only« approach in accordance with IAS 36 »Impairment

of Assets«. As in the prior year, the annual impairment test on

goodwill did not give rise to any impairment losses in continuing

operations.

In the fiscal year, impairment losses of € 527 thousand were

recognized on brands and customer relationships acquired in

the course of business combinations.

The calculation of fair value less costs to sell per cash

generating unit was based on a discount rate of between

6.2% and 7.5% taking business taxes into account (prior

year: between 6.4% and 8.2%). The sustainable growth rate

remained unchanged compared to the prior year at 1.0%

for all cash generating units.

Research and development expenses totaling € 5,429 thousand

were recognized in the income statement in the reporting year

(prior year: € 4,663 thousand).

135


19 | PROPERTy, PlANT AND EquIPmENT

T 31 developmenT of properTy, planT and equipmenT

in €‘000

land and buildings

technical equipment and

machinery

other equip-ment, furniture

and fixtures

assets under construction

Total

cost

As of January 1, 2010 438,334 96,872 179,777 3,080 718,063

Currency translation differences 3,170 6,815 2,442 10 12,437

Change in scope of consolidation 143 1,335 2,074 0 3,552

acquisitions of subsidiaries 1,911 1,349 3,573 0 6,833

additions 5,054 5,927 20,579 3,898 35,458

disposals –2,721 –2,327 –18,940 –24 –24,012

reclassifications to »held for sale« –2,015 –772 –420 0 –3,207

reclassifications 2,475 115 –27 –2,942 –379

As of December 31, 2010/January 1, 2011 446,351 109,314 189,058 4,022 748,745

Currency translation differences –54 2,340 453 155 2,894

Change in scope of consolidation –5,422 1,135 –3,327 77 –7,537

acquisitions of subsidiaries 691 1,577 2,377 0 4,645

additions 13,271 9,064 23,267 10,463 56,065

disposals –7,848 –2,971 –8,227 5 –19,041

reclassifications 5,427 1,211 335 –8,131 –1,158

As of December 31, 2011 452,416 121,670 203,936 6,591 784,613

depreciation

As of January 1, 2010 168,248 71,017 125,113 0 364,378

Currency translation differences 1,290 5,420 1,894 0 8,604

Change in scope of consolidation 56 939 1,159 0 2,154

acquisitions of subsidiaries 487 780 2,962 0 4,229

depreciation 11,473 6,767 17,751 0 35,991

impairment losses 4,075 0 51 0 4,126

disposals –849 –2,189 –18,175 0 –21,213

reversals of impairment losses –372 0 0 0 –372

reclassifications to »held for sale« –582 –346 –323 0 –1,251

reclassifications 7 –12 –314 0 –319

As of December 31, 2010/January 1, 2011 183,833 82,376 130,118 0 396,327

Currency translation differences 258 1,718 328 0 2,304

Change in scope of consolidation –2,511 –88 –2,380 0 –4,979

acquisitions of subsidiaries 129 378 1,830 0 2,337

depreciation 11,493 7,332 19,268 0 38,093

disposals –4,353 –2,866 –7,804 0 –15,023

reversals of impairment losses –431 –402 –6 0 –839

reclassifications –779 58 4 0 –717

As of December 31, 2011 187,639 88,506 141,358 0 417,503

Carrying amount as of December 31, 2011 264,777 33,164 62,578 6,591 367,110

Carrying amount as of December 31, 2010 262,518 26,938 58,940 4,022 352,418

136


The impairment losses were recognized in accordance with

IAS 36 »Impairment of Assets«.

The carrying amounts of finance lease assets recognized

under property, plant and equipment break down as follows:

T 32 reCognized asseTs under finanCe leases

in €‘000 dec. 31, 2011 dec. 31, 2010

land and buildings 1,208 1,340

technical equipment and machinery 120 187

other equipment, furniture and fixtures 64 133

1,392 1,660

The corresponding liabilities from finance leases are

presented under financial debt, note 32.

20 | INVESTmENT PROPERTy

T 33 developmenT of invesTmenT properTy

in €‘000 2011 2010

cost

As of January 1 8,201 47,105

Currency translation differences 0 8

acquisitions of subsidiaries 0 201

additions 89 0

disposals 0 –39,083

reclassifications 1,768 –30

As of December 31 10,058 8,201

depreciation

As of January 1 2,826 6,274

acquisitions of subsidiaries 0 4

depreciation 99 92

disposals 0 –3,520

reclassifications 1,335 –24

As of December 31 4,260 2,826

Carrying amount as of December 31 5,798 5,375

As of December 31, 2011, investment properties had a market

value of € 10,849 thousand (prior year: € 10,401 thousand).

If current market data is not available, the market values for

real estate are determined using the capitalized earnings

method. The land value is derived from the purchase prices

for comparable properties or the standard land value pursuant

to the BauGB [»Baugesetzbuch«: German Federal Building

Act]. In order to determine the value of a building, the annual

net proceeds from the property in question, reduced by

interest on the land value, are determined on the basis of the

expected net rent and recognized over its estimated remaining

useful life. The interest rate used is a standard land value

derived from the market. Characteristics affecting the market

value of the respective investment property are taken into

account in each valuation step.

Rental income totaling € 595 thousand (prior year: € 575 thou-

sand) was generated in fiscal 2011 from investment properties

while the related expenses for repair and maintenance came

to € 2,862 thousand (prior year: € 1,059 thousand). As in the

prior year, otherwise no expenses were incurred in connection

with investment properties that did not generate rental

income.

21 | INVESTmENTS ACCOuNTED FOR uSING ThE

EquITy mEThOD

The separate financial statements of associated companies

that are accounted for using the equity method give the

following financial information; this information has not been

adjusted to the share held by the Group.

T 34 assoCiaTed Companies

in €‘000 dec. 31, 2011 dec. 31, 2010

aggregated assets 21,547 293,574

aggregated liabilities 13,687 217,076

total amount of unrecognized gains of the period

0 0

accumulated total amount of unrecognized losses

0 0

in €‘000 2011 2010

aggregated revenue 32,074 191,746

aggregated net income for the year 2,501 5,730

There were two disposals in the reporting year of associated

companies accounted for using the equity method. The

participation in the ATISAE group is measured at cost since

January 1, 2011, as there is no longer significant influence

137


over the group. In addition, the participation in Hannover

Leasing Automotive GmbH, Pullach, was sold as of

September 9, 2011.

The following table summarizes financial information on the

Group’s joint ventures. The information relates to the Group’s

interest in the respective joint ventures.

T 35 JoinT venTures

in €‘000 dec. 31, 2011 dec. 31, 2010

aggregated current assets 27,459 25,799

aggregated non-current assets 149,910 190,027

aggregated current liabilities 8,916 11,480

aggregated non-current liabilities 141,862 174,805

in €‘000 2011 2010

aggregated revenue 114,808 110,056

aggregated net income for the year 478 2,776

The financial data disclosed is on the one hand from the two

Turkish joint venture entities TÜVTURK Kuzey, Istanbul, and

TÜVTURK Güney, Istanbul. The venturers of the joint ventures

are the Dogus group, Turkey, the TÜV SÜD Group and Test

A.S., Istanbul, an entity of the Bridgepoint group, UK, which

each have a one-third stake in the joint ventures.

In 2007, the TÜVTURK joint venture companies concluded

a concession agreement with the Turkish government,

governing the implementation of regular vehicle inspections

throughout Turkey. Using different contractual partners, the

joint venture is the exclusive provider of vehicle inspections in

Turkey for the 20-year term of the contract. In 2011, 6.1 million

(prior year: 5.4 million) inspections were performed, generating

revenue of TRY 739.3 million or € 316.6 million (prior year:

TRY 605.0 million or € 302.8 million).

On the other hand, the table includes the financial data of the

operating company in the vehicles inspection business TÜVTURK

Istanbul, Istanbul. This entity was established in 2007 and has

been included in the consolidated financial statements using

the equity method since that time. The interests are held by

the same three venturers with equal shareholdings of 16.8%

each and by TÜVTURK Kuzey and TÜVTURK Güney, which

acquired 49.6% of the shares in June 2010 via a capital increase

performed in return for the issue of new shares.

In the reporting year, the unilateral capital increase from the

prior year meant that a carrying amount of € 2,501 thousand

was recorded as of the reporting date, in spite of the remaining

share in losses and the negative market development of the

cash flow hedge.

In 2011, the TÜVTURK joint venture companies recorded a

consolidated overall profit of € 1,435 thousand (prior year:

€ 4,435 thousand). The reduction in comparison to prior

year principally results from the unfavorable exchange rate

between the US dollar and the Turkish lira and thus from a

currency translation loss from financing measures.

In the course of financing the project in Turkey, the share-

holders concluded a »share pledge agreement«, pledging all

shares in the Turkish joint venture companies to UniCredit

Bank AG (formerly: Bayerische Hypo- und Vereinsbank AG),

Munich, as the security agent. However, until an event of

default, voting rights and entitlement to dividends remain with

the shareholders.

The financing agreements, which meet international standards

for project financing, also provide for limits with regard to

further loans to the Turkish companies, or distribution limits.

A number of additional covenants must also be taken into

account by the contracting parties, who are also required to

submit regular, detailed financial reports.

138


22 | OThER FINANCIAl ASSETS

T 36 oTher finanCial asseTs

in €‘000 dec. 31, 2011 dec. 31, 2010

investments in affiliated companies 3,866 9,972

loans to affiliated companies 215 1,080

loans to associated companies 27,565 1,177

other participations 400 0

non-current securities 90,654 77,543

share of policy reserve from employer's pension liability insurance

84

12,735

other loans 467 2

123,251 102,509

Other participations in the reporting year contain the shares

in the ATISAE group, which were reported under investments

accounted for using the equity method in the prior year.

An amount of € 8,104 thousand (prior year: € 6,343 thousand)

of the non-current securities are pledged under a trust agree-

ment concluded to secure the value of the settlement claims

for employees in the block model of the phased retirement

scheme (Altersteilzeit).

The policy reserve of the »Alters- und Hinterbliebenen-

Versicherung der Technischen Überwachungsvereine VVaG«

fulfils the prerequisites for plan assets for the first time in 2011

and is thus netted accordingly with the pension provisions as

of the reporting year.

23 | OThER NON-CuRRENT ASSETS

Of other non-current assets totaling € 4,402 thousand

(prior year: € 4,283 thousand), € 389 thousand (prior year:

€ 362 thousand) relates to forward exchange transactions

recorded at market value.

24 | INVENTORIES

Inventories amounting to € 3,230 thousand (prior year:

€ 2,625 thousand) primarily consist of supplies.

25 | TRADE RECEIVABlES

T 37 Trade reCeivables

in €‘000 dec. 31, 2011 dec. 31, 2010

receivables according to the percentage-of-completion method

62,337

55,320

other trade receivables 230,778 210,626

293,115 265,946

Valuation allowances on trade receivables are recognized

on separate accounts and amount to € 9,468 thousand as of

the reporting date (prior year: € 9,396 thousand).

The maturity profile of other trade receivables is as follows:

T 38 maTuriTy sTruCTure

in €‘000 dec. 31, 2011 dec. 31, 2010

Other trade receivables 230,778 210,626

thereof neither impaired nor past due 149,744 130,724

thereof not impaired but past due by

up to 30 days 50,226 54,387

31 to 60 days 13,493 9,629

61 to 90 days 5,726 5,245

91 to 180 days 4,854 4,142

181 to 360 days 1,615 1,919

more than 360 days 1,376 881

thereof impaired as of the reporting date

3,744

3,699

There is no indication that customers might not be able to

settle their obligations regarding receivables that are neither

impaired nor past due.

139


26 | OThER RECEIVABlES

AND OThER CuRRENT ASSETS

Miscellaneous financial assets include in particular deferred

interest and other receivables from cost allocations.

Miscellaneous non-financial assets essentially include

deferred expenses.

27 | CASh AND CASh EquIVAlENTS

This item includes cash in hand, checks and bank balances

as well as current securities with an original term of a maximum

of three months. An amount of € 2 thousand (prior year:

€ 1,665 thousand) of the cash and cash equivalents is pledged

under a trust agreement concluded to secure the value of

the settlement claims for employees in the block model of the

phased retirement scheme (Altersteilzeit).

28 | NON-CuRRENT ASSETS AND DISPOSAl

GROuPS hElD FOR SAlE AS wEll AS

ASSOCIATED lIABIlITIES

The prior-year figure included the assets and liabilities of the

Msource group, of e4t and of Novo Quality Services. Those

entities were sold in 2011. The deconsolidation effects are

explained in note 3 »Business combinations and disposals«.

The prior-year figure also included the carrying amount of the

investment accounted for using the equity method, Hannover

Leasing Automotive GmbH, Pullach, as well as the carrying

amounts of the assets allocable to a crash test lab that have

now also been sold.

The income and expenses from currency translation allocable

to the disposal groups held for sale and reported directly in

equity amounted to € 763 thousand in the prior year.

29 | EquITy

The capital subscribed of TÜV SÜD AG is divided into

26,000,000 no-par value bearer shares.

The capital reserve mainly includes the premium for various

capital increases carried out since 1996.

Revenue reserves contain the undistributed profits generated

in the fiscal year and in the past by the entities included in

the consolidated financial statements. Moreover, the revenue

reserves record the offsetting of debit and credit differences

resulting from capital consolidation for acquisitions prior to

December 31, 2005, as well as the net amount of the adjustments

recognized in other comprehensive income in connection

with the first-time application of IFRSs. Furthermore, actuarial

gains and losses from defined benefit pension plans and

similar obligations were for the first time allocated directly to

revenue reserves during the reporting period, taking into

in €‘000 dec. 31, 2011 dec. 31, 2010

receivables from affiliated companies 2,567 3,567

receivables from other participations 1,066 2,819

Cash pool receivables from related parties 887 5,301

fair values of derivative financial instruments 319 1,584

receivables from the federal employment agency 3,223 3,892

miscellaneous financial assets 20,916 23,854

Other receivables and other current financial assets 28,978 41,017

refund claims against insurance 13,918 17,915

miscellaneous non-financial assets 10,206 12,153

Other current non-financial assets 24,124 30,068

53,102 71,085

T 39 oTher reCeivables and oTher CurrenT asseTs

140


account the related deferred taxes. This reflects the fact that

these amounts will not be reclassified to the income statement

in future periods.

Other reserves record the differences arising from the currency

translation of foreign subsidiaries’ separate financial state-

ments without effect on income, effects from the measurement

of securities and cash flow hedges without effect on income

and the income and expenses recognized without effect on

income arising from investments accounted for using the equity

method, in each case less the corresponding deferred taxes.

In addition to ensuring the continued existence of the company

as a going concern, TÜV SÜD’s capital management aims to

achieve an adequate return in excess of the cost of capital in

order to increase the value of the company in the long term.

TÜV SÜD AG is not subject to any statutory capital requirements.

30 | PROVISIONS FOR PENSIONS AND SImIlAR

OBlIGATIONS

T 40 provisions for pensions and similar obligaTions

in €‘000 dec. 31, 2011 dec. 31, 2010

Provisions for pensions in Germany

364,934

377,413

Provisions for pensions in other countries

16,609

13,246

Provisions for similar obligations in other countries

4,764

3,722

386,307 394,381

Pension provisions are recorded as a result of benefit plans

for old age, disability and surviving dependants’ pension com-

mitments. The Group’s obligations vary according to legal,

fiscal and economic framework conditions of the country

concerned and are usually based on the length of employee

service and level of remuneration.

The provisions for similar obligations relate to termination

benefits in other countries.

The Group’s post-employment benefits include both defined

contribution and defined benefit plans.

In the case of defined contribution plans, the company pays

contributions to state or private pension funds on a legal,

contractual or voluntary basis. The company has no obligation

to provide further benefits once it has made these payments.

Ongoing premium payments (including contributions to state

pension insurance) are stated as pension expenses for

the respective year; in fiscal 2011 they amounted to a total

of € 49,845 thousand (prior year: € 48,009 thousand).

In Germany, pension systems maintained by the company

are mostly defined benefit plans. The pension commitments

are integrated schemes similar to those for civil servants,

against which the state pension is offset. The integrated

schemes were discontinued for new hires in 1981 and 1992

respectively.

Pension obligations were then granted temporarily in accord-

ance with the »dual pension formula«. The amount of the

pension benefit is based on the qualifying period of employment

and the pensionable income; different percentage rates

are applied to determine the benefit amount depending on

whether the pensionable income is above or below the

income threshold. These defined benefit plans were discon-

tinued in 1996. New employees currently receive direct

guarantees at TÜV Hessen only.

Cover is provided in part directly, and in part by legally

independent pension and welfare institutions. The assets

of the welfare institutions are reported as plan assets.

In order to extend the external financing of pension obligations

in Germany, operating assets were transferred to TÜV SÜD

Pension Trust e.V., established for this purpose, in 2006 as

part of a contractual trust agreement. The funds are adminis-

tered by this association in a fiduciary capacity, and serve

solely to finance pension obligations. Pursuant to IAS 19, the

transferred funds are to be treated as plan assets, and are

therefore offset against pension obligations.

141


There are defined benefit pension plans in the UK whose

amount depends among other things on salary and on length

of service. Benefit entitled employees have an obligation

to make additional contributions. These pension schemes

were closed for new employees joining the company. To fully

fund the obligations, there is a company-based pension

plan according to which the plans assets can only be used to

settle the pension obligations under a contractual trust

agreement. If, calculated in accordance with actuarial principles,

there is a shortfall in these pension plans, the sponsoring

employer TÜV SÜD (UK) Ltd., Fareham Hants, UK, and the

trustee must agree on a restructuring plan that has to be

presented to The Pension Regulator (TPR) in the UK for

approval. To finance the shortfall of around € 20.9 million

determined at the end of 2011, in addition to the regular

contributions by the employer, the sponsoring employer is

to make an annual contribution over a period of ten years.

The amounts of the pension obligation (actuarial present

value of earned benefit entitlements, defined benefit obligation)

are based on actuarial assumptions. The defined benefit obli-

gation was calculated on the basis of the following actuarial

assumptions:

T 41 aCTuarial assumpTions for deTermining The defined benefiT obligaTions

dec. 31, 2011 dec. 31, 2010

in % Germany other countries Germany other countries

discount rate 5.25 4.80 5.25 5.17

future salary increases 2.25 3.31 2.25 3.24

future pension increases 2.00 3.15 2.00 3.05

Adjustment for forecast long-term inflation is taken into

account in the development of salaries and wages.

Actuarial gains or losses result from changes in the discount

rate as of the respective reporting date, from changes in

the portfolio and deviations of actual developments from the

assumptions made in the valuation (e.g., salary or pension

increases). As of the reporting date, actuarial gains and

losses after tax are posted to other comprehensive income.

The assumptions used to calculate the defined benefit obliga-

tion as of the respective measurement date of December 31

of the prior year also apply to the calculation of the interest

cost and the current service cost in the subsequent fiscal

year. The assumptions used in the calculation of the pension

expenses for fiscal 2011 are therefore already defined as of

the reporting date December 31, 2010.

142


T 42 aCTuarial assumpTions for deTermining pension expenses

share in plan assets

in % dec. 31, 2011 dec. 31, 2010

shares 15.9 17.6

fixed-interest securities 66.0 70.5

real estate and similar assets 5.6 5.5

other (including cash and cash equivalents) 12.5 6.4

T 43 porTfolio sTruCTure of plan asseTs as of measuremenT daTe

2011 2010

in % Germany other countries Germany other countries

discount rate 5.25 5.17 5.50 5.71

future salary increases 2.25 3.24 2.25 3.50

future pension increases 2.00 3.05 2.00 3.30

return on plan assets 4.80 5.10 5.50 6.25

The assumptions relating to the expected overall return on

plan assets are based on the anticipated long-term returns

for the individual asset categories, and take into account the

target portfolio structure. The actual portfolio structure as of

the reporting date is as follows:

The key assumptions in calculating pension expenses are

presented in the following overview:

In 2011, the capital markets were first affected by the disaster

in Fukushima and then later in the year by the euro debt crisis.

The share portfolio was hedged on a case-by-case basis as

a result. After the spiraling of the euro debt crisis, there were

times when the share portfolio was hedged completely, with

the exception of the emerging markets mutual funds newly

acquired at the beginning of the year. While significant losses

were recorded on the shares, in some cases these were

offset by profits from the hedges. The bonds in the Oktagon

fund once again did not include any government bonds

from Greece, Ireland and Portugal. The share of Spanish

and Italian bonds was reduced substantially compared with

the benchmark. The percentage of corporate bonds was

increased to substitute government bonds.

143


The funded status of defined benefit obligations as well as a

reconciliation to the amounts recognized in the statement of

financial position is shown in the table below:

Changes in defined benefit obligations and plan assets are

as follows:

Around 57% of the defined benefit obligation is allocable to

pensioners, and 43% to active employees. The duration of the

obligations is 13.5 years (prior year: 13.6 years).

The development of the defined benefit obligation is influenced

particularly by the pay-out of the majority of the obligations

of the GRC group acquired in the prior year from the available

plan assets as part of the contractually agreed settlement

of these obligations (retroactive plan amendments and other).

Because the discount rate for obligations in Germany has not

changed since the prior year, there were only comparatively

small actuarial effects. While actuarial gains were recorded

in Germany due to the development of the parameters of

statutory health insurance and due to changes in the portfolio,

actuarial losses were recorded for the obligations in other

countries, principally on account of the changed discount rate

in the UK.

Germany other countries total

in €‘000 2011 2010 2011 2010 2011 2010

defined benefit obligation 1,183,266 1,166,247 71,586 74,364 1,254,852 1,240,611

fair value of plan assets 818,332 788,834 50,213 57,396 868,545 846,230

Net obligation = carrying amount as of December 31

364,934

377,413

21,373

16,968

386,307

394,381

2011 2010

in €‘000 Germany other countries total Germany other countries total

Defined benefit obligation as of January 1 1,166,247 74,364 1,240,611 1,134,615 48,701 1,183,316

service cost 16,322 2,728 19,050 16,540 1,805 18,345

interest cost 59,743 3,753 63,496 60,963 3,432 64,395

Benefits paid –55,718 –2,904 –58,622 –54,676 –2,569 –57,245

Contributions by the beneficiaries 0 739 739 0 781 781

retroactive plan amendments and other 0 –12,456 –12,456 0 0 0

actuarial gains (–) and losses (+) –3,328 6,537 3,209 17,867 4,417 22,284

Past service cost 0 –2,365 –2,365 –9,062 26 –9,036

Change in scope of consolidation 0 137 137 0 17,207 17,207

Currency translation differences 0 1,053 1,053 0 564 564

Defined benefit obligation as of December 31

1,183,266

71,586

1,254,852

1,166,247

74,364

1,240,611

thereof unfunded 198,619 4,122 202,741 227,903 3,414 231,317

thereof partially funded 984,647 67,464 1,052,111 938,344 70,950 1,009,294

T 44 funded sTaTus of The defined benefiT obligaTion

T 45 developmenT of defined benefiT obligaTion

144


Total benefits paid of € 61,700 thousand are expected

for fiscal 2012.

2011 2010


Fair value of plan assets as of January 1 788,834 57,396 846,230 719,443 35,017 754,460

expected return on plan assets 37,423 2,907 40,330 42,868 2,990 45,858

actuarial gains (+) and losses (–) –19,759 3 –19,756 –9,799 1,630 –8,169

Contributions by the employer 58,924 3,537 62,461 82,875 3,115 85,990

Contributions by the beneficiaries 0 739 739 0 781 781

Benefits paid –47,090 –2,886 –49,976 –46,553 –2,567 –49,120

retroactive plan amendments and other 0 –12,456 –12,456 0 0 0

Change in scope of consolidation 0 0 0 0 15,962 15,962

Currency translation differences 0 973 973 0 468 468

Fair value of plan assets as of December 31 818,332 50,213 868,545 788,834 57,396 846,230

actual return on plan assets 17,664 2,910 20,574 33,069 4,620 37,689

T 46 developmenT of plan asseTs

T 47 neT pension expense for defined benefiT plans

2011 2010


service cost 16,322 2,728 19,050 16,540 1,805 18,345

interest cost 59,743 3,753 63,496 60,963 3,432 64,395

expected return on plan assets –37,423 –2,907 –40,330 –42,868 –2,990 –45,858

Past service cost 0 –2,365 –2,365 –9,062 26 –9,036

38,642 1,209 39,851 25,573 2,273 27,846

The actuarial losses of € 19,759 thousand incurred in Germany

in 2011 (prior year: € 9,799 thousand) are primarily attributable

to the Oktagon fund. The actual return of 1.9% in total

(prior year: 4.3%) was below the target return expected for

fiscal 2011, which is based on the expected average long-

term return of 4.9% for plan assets. The fixed-interest

securities, including government and corporate bonds,

resulted in returns of between 3.9% and 7.3% in 2011. The

losses in the shares were reduced substantially thanks

to hedging strategies in the Oktagon fund.

In Germany, the pension plan is usually funded by recon-

tributing refunded benefit payments to the plan. The actual

contribution is determined each year by resolution of the

Board of Management. The Group intends to make a payment

of € 45,779 thousand towards the defined benefit plan in

the next fiscal year (prior year: € 44,015 thousand) in order

to reduce the existing shortfall in cover.

The total net pension expense for defined benefit pension

plans (expenses less income) recorded in the income statement

for the fiscal years 2011 and 2010 breaks down as follows:

145


Net actuarial losses totaling € 22,965 thousand were recorded

in fiscal 2011, which are a result of actuarial losses from pension

obligations totaling € 3,209 thousand and actuarial losses

from plan assets totaling € 19,756 thousand. These were

recorded in other comprehensive income, net of deferred

taxes. Net actuarial losses of € 30,453 thousand were

recorded in the prior year, € 22,284 thousand of which related

to pension obligations and € 8,169 thousand to plan assets.

Adjusted for currency fluctuation, cumulative net actuarial gains

amounting to € 73,731 thousand (prior year: € 96,355 thousand)

were recognized in other comprehensive income by the end

of the reporting year.

The defined benefit obligation, plan assets, funded status and

experience adjustments for this fiscal year and prior fiscal years

are as follows:

The personnel provisions mainly pertain to variable remuner-

ation for staff and management including associated social

security contributions, obligations arising from the agreements

under the German phased retirement scheme, medical benefits

and anniversary bonuses.

The provisions for litigation costs, warranty and similar

obligations are counterbalanced by claims for reimbursement

from insurance companies totaling € 13,918 thousand (prior

year: € 17,915 thousand) that have been recognized as current

assets.

The provisions for restructuring costs mostly relate to adopted

and announced restructuring measures in the TÜV SÜD Industry

Services division.

31 | OThER PROVISIONS

T 48 developmenT of funded sTaTus and experienCe adJusTmenTs

in €‘000 2011 2010 2009 2008 2007

defined benefit obligation 1,254,852 1,240,611 1,183,316 1,087,214 1,138,452

Plan assets 868,545 846,230 754,460 701,511 689,599

funded status 386,307 394,381 428,856 385,703 448,853

experience increase (+)/decrease (–) of the present value of defined benefit obligation –5,656

–26,124

17,781

–28,446

123

experience increase (+)/decrease (–) of the fair value of plan assets

–19,756

–8,169

11,238

–16,853

–18,042

T 49 oTher provisions

dec. 31, 2011 dec. 31, 2010

in €‘000 total

thereof current

total

thereof current

Personnel provisions 100,452 79,657 99,876 80,708

litigation, warranty and similar obligations 18,865 18,865 23,230 23,230

restructuring provisions 12,234 11,736 11,645 7,400

miscellaneous provisions 13,345 7,158 13,405 7,298

144,896 117,416 148,156 118,636

146


32 | FINANCIAl DEBT

Financial debt includes all interest-bearing liabilities of the

Group. Financial debt breaks down as follows:

Liabilities to banks chiefly include the loan obligations of

TUV SUD Invest LP, Atlanta, amounting to € 57,964 thousand or

USD 75 million (prior year: € 49,394 thousand or USD 66 million)

and of TÜV SÜD Bursa, amounting to € 16,236 thousand or

USD 21 million (prior year: € 18,677 thousand or USD 25 million).

While the loan due to TÜV SÜD Bursa with annual repayment

of USD 4 million has a term that runs until 2017, TUV SUD

Invest LP’s loan takes the form of a money market loan with

a renewable term of three months. This money market loan

is prolonged as part of the syndicated loan for a total of

€ 200 million that has a fixed term until July 2016. TÜV SÜD

intends to take advantage of the extension agreement for the

long term and therefore reports the loan as a non-current

item. In the prior year, TÜV SÜD planned to decide each quarter

on whether to renew it and thus reported it as a current item.

An amount of € 773 thousand (prior year: € 3,735 thousand)

of the liabilities to banks is due in more than five years, and

€ 914 thousand (prior year: € 1,139 thousand) of the liabilities

from finance leases is due in more than five years.

Other provisions developed as follows in the reporting year:

in €‘000

Personnel provisions

litigation, warranty and

similar obligations

restructuring provisions

miscellaneous provisions

Other provisions

Balance as of January 1, 2011 99,876 23,230 11,645 13,405 148,156

Currency translation differences 619 –40 6 84 669

Change in scope of consolidation –621 0 0 –118 –739

additions 70,775 2,028 1,911 5,124 79,838

utilization –64,119 –1,642 –1,251 –4,129 –71,141

reversals –6,078 –4,711 –77 –1,018 –11,884

unwinding of the discount 0 0 0 –3 –3

Balance as of December 31, 2011 100,452 18,865 12,234 13,345 144,896

T 50 developmenT of oTher provisions

non-current Current total

in €‘000 dec. 31, 2011 dec. 31, 2010 dec. 31, 2011 dec. 31, 2010 dec. 31, 2011 dec. 31, 2010

liabilities to banks 71,575 16,229 8,027 54,910 79,602 71,139

liabilities from finance leases 1,719 1,826 218 245 1,937 2,071

Cash pool liabilities to affiliated companies 0 0 501 287 501 287

Cash pool liabilities to other related parties 0 0 993 1,863 993 1,863

73,294 18,055 9,739 57,305 83,033 75,360

T 51 finanCial debT

147


33 | TRADE PAyABlES

T 52 Trade payables

in €‘000 dec. 31, 2011 dec. 31, 2010

liabilities according to the percentage-of-completion method

22,808 21,616

other trade payables 45,456 45,664

68,264 67,280

34 | OThER lIABIlITIES

non-current Current total


liabilities to affiliated companies 0 0 2,008 1,827 2,008 1,827

liabilities to other participations 0 0 433 2,020 433 2,020

fair values of derivative financial instruments

2,918*

2,123*

2,331

129

5,249

2,252

outstanding invoices 0 0 22,424 18,047 22,424 18,047

miscellaneous financial liabilities 9,236* 9,192* 12,168 19,279 21,404 28,471

Other financial liabilities 12,154 11,315 39,364 41,302 51,518 52,617

advance payments received 0 0 25,607 30,932 25,607 30,932

Vacation claims, flexitime and overtime credits

0 0

43,401

39,787

43,401

39,787

other taxes 0 0 32,101 32,573 32,101 32,573

social security liabilities 1,052 2,424 3,455 4,069 4,507 6,493

miscellaneous non-financial liabilities 0 0 12,498 13,543 12,498 13,543

Other non-financial liabilities 1,052 2,424 117,062 120,904 118,114 123,328

13,206 13,739 156,426 162,206 169,632 175,945

* thereof due in more than five years: € 3,713 thousand (prior year: € 3,725 thousand)

T 53 oTher liabiliTies

Miscellaneous financial liabilities contain both current and non-

current contingent consideration from business combinations.

Miscellaneous non-financial liabilities include in particular

accrued expenses and deferred income.

148


35 | CONTINGENT lIABIlITIES

TÜV SÜD AG and its subsidiaries have issued or have had

issued guarantees or warranties in favor of customers or

creditors. The following table presents the contingent liabili-

ties for which the main debtor is not a consolidated entity:

T 54 ConTingenT liabiliTies

in €‘000 dec. 31, 2011 dec. 31, 2010

Guarantee obligations 4,843 5,053

Contingent liabilities arising from litigation risks

757

2,409

miscellaneous contingent liabilities 11 11

5,611 7,473

Apart from the contingent liabilities reported, TÜV SÜD has

assumed joint and several liability in relation to interests in

civil law associations, other partnerships and joint ventures.

36 | lEGAl PROCEEDINGS

TÜV SÜD AG and its subsidiaries are not involved in any

litigation which could have a material impact on the economic

or financial situation of the individual entities or the Group as

a whole. The group entities concerned have formed provisions

at suitable amounts to account for any burdens from other

litigation. There are refund entitlements from insurance policies

for some of these items.

37 | OThER FINANCIAl OBlIGATIONS

The following minimum lease payments will be due in future

on the basis of existing rental and lease agreements:

Rental and lease expenses amounted to € 41,226 thousand in

fiscal 2011 (prior year: € 38,237 thousand).

There are also other financial obligations amounting to

€ 8,882 thousand (prior year: € 9,182 thousand), which are

mainly attributable to maintenance agreements.

To close the shortfall in cover for old-age pensions in the UK,

the sponsoring employer TÜV SÜD (UK) Ltd. agreed to pay an

annual contribution of GBP 1.7 million over a period of ten years.

T 55 oTher finanCial obligaTions as of deCember 31, 2011

T 56 oTher finanCial obligaTions as of deCember 31, 2010

in €‘000

due in less than

1 year

due in

1 to 5 years

due in more than

5 yearsdec. 31, 2011

total

future obligations from rental and lease agreements for real estate 33,390 79,592 45,536 158,518

future obligations from other operating leases 4,947 6,783 0 11,730

38,337 86,375 45,536 170,248

in €‘000

due in less than

1 year

due in

1 to 5 years

due in more than

5 yearsdec. 31, 2010

total

future obligations from rental and lease agreements for real estate 30,867 70,706 57,533 159,106

future obligations from other operating leases 4,037 4,284 2 8,323

34,904 74,990 57,535 167,429

149


other notes38 | ADDITIONAl INFORmATION ON

FINANCIAl INSTRumENTS

The following tables show financial assets and liabilities by

measurement categories relevant under IFRS 7 on the basis

of the items of the statement of financial position:

measurement categories in accordance with IAS 39

Financial assets/

liabilities held for trading

loans and receivables

Available-

for-sale financial

assets

Financial liabilities

in €‘000

Carrying amount

dec. 31, 2011

at fair valuethrough profit

or loss

at amortized

cost*

at fair value recognized

in equity

at amortized

cost*

assets

Non-current assets

other financial assets 123,251


loans and other receivables 1,166 1,166

financial instruments that do not fall in the scope of ifrs 7 31,431

other non-current assets 4,402


financial derivatives 389 389

Current assets

trade receivables 293,115 293,115

other receivables and other current assets 53,102

other receivables and other financial assets 28,659 28,659


other non-financial assets 24,124

Cash and cash equivalents 245,285

Cash 245,284 245,284

short-term securities 1 1


Non-current liabilities

non-current financial debt 73,294 73,294

other non-current liabilities 13,206

other financial liabilities 9,236 9,236

financial derivatives 2,918 2,918

other non-financial liabilities 1,052

Current liabilities

Current financial debt 9,739 9,739

trade payables 68,264 68,264

other current liabilities 156,426




Total by measurement category in accordance with IAS 39

assets 708 572,237 90,655

liabilities 5,249 197,566

* the carrying amount approximates fair value.

T 57 finanCial insTrumenTs by measuremenT CaTegory

150


measurement categories in accordance with IAS 39

Financial assets/

liabilities held for trading

loans and receivables

Available-

for-sale financial

assets

Financial liabilities

in €‘000

Carrying amount

dec. 31, 2010

at fair valuethrough profit

or loss

at amortized

cost*

at fair value recognized

in equity

at amortized

cost*

assets

Non-current assets

other financial assets 102,509


loans and other receivables 13,817 13,817

financial instruments that do not fall in the scope of ifrs 7 11,149

other non-current assets 4,283



Current assets

trade receivables 265,946 265,946

other receivables and other current assets 71,085

other receivables and other financial assets 39,433 39,433


other non-financial assets 30,068

Cash and cash equivalents 189,225

Cash 189,224 189,224

short-term securities 1 1


Non-current liabilities

non-current financial debt 18,055 18,055

other non-current liabilities 13,739




Current liabilities

Current financial debt 57,305 57,305

trade payables 67,280 67,280

other current liabilities 162,206




Total by measurement category in accordance with IAS 39

assets 1,946 512,341 77,544

liabilities 2,252 193,005

* the carrying amount approximates fair value.

151


In the case of current loans and receivables and of liabilities

measured at amortized cost, it is assumed that the nominal

value is equal to the fair value on account of the short residual

terms. In the case of non-current items, the nominal value

less impairment losses approximates their fair values. Invest-

ments in affiliated companies and participations reported

under other financial assets are measured at amortized cost

because their fair value cannot be reliably measured.

Financial instruments that are recognized at fair value in the

statement of financial position are required to be allocated

to the following three levels of the fair value hierarchy. The

hierarchy levels reflect the significance of the inputs used

in determining fair value and the extent to which they are

observable on the market.

The hierarchy levels are as follows:

– Quoted prices in active markets for identical assets or

liabilities (level 1)

– Inputs other than quoted prices included within level

1 that are observable for the asset or liability, either

directly (i.e., as prices) or indirectly (i.e., derived from

prices) (level 2)

– Inputs that are not based on observable market data

(level 3)

Financial assets and liabilities that are recognized in the

statement of financial position at fair value are allocated as

follows to the three levels of the fair value hierarchy:

fair value hierarchy

in €‘000 level 1 level 2 level 3 total

Financial assets at fair value

available-for-sale financial assets 90,655 0 0 90,655

financial derivatives 0 708 0 708

90,655 708 0 91,363

Financial liabilities at fair value

financial derivatives* 0 5,249 0 5,249

0 5,249 0 5,249

* thereof with a hedging relationship: € 2,918 thousand

fair value hierarchy

in €‘000 level 1 level 2 level 3 total

Financial assets at fair value

available-for-sale financial assets 77,544 0 0 77,544

financial derivatives 0 1,946 0 1,946

77,544 1,946 0 79,490

Financial liabilities at fair value

financial derivatives* 0 2,252 0 2,252

0 2,252 0 2,252

* thereof with a hedging relationship: € 2,123 thousand

T 58 fair value hierarChy as of deCember 31, 2011

T 59 fair value hierarChy as of deCember 31, 2010

152


net gains and losses by measurement category

The net gains and losses on the financial instruments

recognized in the income statement, by measurement

category, are as follows:

The net gains and losses were mainly attributable to effects

from currency translation, impairment losses and the disposal

of available-for-sale financial assets.

The net gains and losses recorded for assets and liabilities

measured at fair value through profit or loss result from mark-

ing hedging instruments to market.

The »loans and receivables« category mainly comprises the

impairment losses on trade receivables and loans. It also

includes exchange rate gains and losses from measuring

foreign currency receivables.

In the available-for-sale financial assets, the net gains and

losses relate to impairment losses on participations and

non-consolidated affiliated companies. These are countered

by income from the disposal of participations.

The net losses of the liabilities measured at amortized cost

are attributable in particular to effects from the translation

of foreign currency liabilities as of the reporting date. In the

fiscal year 2011, this is mainly the effect of the exchange

rate losses from the measurement of the US dollar loan of

TÜV SÜD Bursa as of the reporting date.

Interest on financial instruments and the impairment losses

on other securities, loans and participations are posted under

other financial result. Impairment losses on trade receivables and other receivables are recorded in other expenses. Exchange

rate gains and losses from currency translation are either

reported in the financial result under currency translation

gains/losses from financing measures or as other expenses

or other income, depending on the economic nature of the

factors that gave rise to them.

in €‘000 2011 2010

financial assets/liabilities at fair value through profit or loss –1,538 –1,562

loans and receivables –4,478 –8,428

available-for-sale financial assets –4,420 1,124

liabilities measured at amortized cost –3,802 –410

–14,238 –9,276

T 60 neT gains and losses by measuremenT CaTegory

153


39 | FINANCIAl RISkS

The TÜV SÜD Group faces financial risks in the form of credit

risks, liquidity risks and market risks. The principles of risk

management are defined by TÜV SÜD’s internal finance policy

as well as numerous binding strategies and guidelines

and are discussed in more detail in the management report.

Credit risks (default risks) exist with regard to the operating

business as well as to available-for-sale financial assets and

derivative financial instruments. Depending on the nature and

extent of the respective transaction, risk-mitigating measures

must be taken for all transactions relating to the operating

business. These include obtaining collateral, credit ratings or

track records of prior business relations, particularly payment

behavior. Recognizable risks are taken into account through

appropriate valuation allowances on receivables that are

based on objective indications in individual cases, or the

maturity profile and actual default history.

Trade receivables, percentage-of-completion receivables and

loans may be defaulted at most to the value of their carrying

amount as of December 31, 2011. Trade receivables that are

past due are listed in note 25 »Trade receivables«.

The maximum credit risk at the time of the disposal of

available-for-sale assets and derivative financial instruments

corresponds to their market value as of December 31, 2011.

The risk of default on securities is minimized by a high degree

of diversity in the investment strategy. Only securities with

an excellent credit rating are purchased. In spite of the euro

debt crisis, the TÜV SÜD Group has not recorded any default

T 61 developmenT of valuaTion allowanCes on finanCial asseTs

in €‘000

other

financial assets

other non-current

assets

trade

receivables

other receivables and other

financial assets

Total

Valuation allowances as of January 1, 2010 6,627 370 7,504 3,109 17,610

Currency translation differences 488 0 312 547 1,347

Change in scope of consolidation 378 0 431 0 809

additions 1,745 34 5,296 275 7,350

utilization –444 –116 –2,448 0 –3,008

reversals 0 –50 –1,635 0 –1,685

reclassifications to »held for sale« 0 0 –64 0 –64

Valuation allowances as of December 31, 2010 8,794 238 9,396 3,931 22,359

Currency translation differences –80 0 –34 76 –38

Change in scope of consolidation –2,093 0 102 –350 –2,341

additions 14,164 13 4,464 105 18,746

utilization –2,912 –154 –1,829 –94 –4,989

reversals 0 0 –2,631 –11 –2,642

Valuation allowances as of December 31, 2011 17,873 97 9,468 3,657 31,095

impairment losses 2011 14,164 13 4,533 0 18,710

impairment losses 2010 3,088 34 5,466 174 8,762

Valuation allowances on financial assets

The development of the valuation allowances on financial

assets as well as the impairment losses recognized in the

income statement in the fiscal year are as follows:

154


on securities. Derivative financial instruments are only con-

cluded with partners that have a very high rating and where a

breach of contractual obligations is thus not expected.

According to internal trading policies, derivative financial

transactions may only be concluded in close consultation

with the corporate treasury department and in connection

with an underlying transaction. To limit risks, subsidiaries are

prohibited from purchasing securities without approval from

the corporate treasury department.

In order to manage liquidity risks, the TÜV SÜD Group always

has up-to-date liquidity planning and sufficient liquidity reserves

in the form of cash and credit lines. Bank balances are held

solely at banks with excellent credit ratings. In addition, maximum

investment limits are set for investment funds at various banks

based on their credit rating in order to avoid cluster risks. Risks

relating to current securities are also minimized by widely

diversifying issuers. In addition to cash and securities, the liquidity

reserve comprises a syndicated credit line for € 200 million.

Approximately € 55 million of this credit line guaranteed by a

syndicate of banks until July 2016 had been utilized as of the

reporting date. The maturity profile of the anticipated undis-

counted cash flows is detailed under note 32 »Financial debt«.

The main market risks resulting from financial instruments are

currency and interest rate risks.

The scope for action with regard to currency management

is defined by TÜV SÜD’s internal policies. Currency risks in

connection with the operating business are hedged using

derivative financial instruments. Forward exchange transactions

and cross-currency swaps are used to hedge intra-group

loans in foreign currencies.

Derivative financial instruments are marked to market on

the basis of market conditions as of the end of the reporting

period. Market valuations provided by banks are additionally

checked for plausibility on the basis of internal calculations.

The amounts recognized for the derivative financial instruments

of the TÜV SÜD Group are presented in the table below.

T 62 derivaTive finanCial insTrumenTs

in €‘000 dec. 31, 2011 dec. 31, 2010

assets

forward exchange transactions and cross-currency swaps

708

1,946

interest rate swaps 0 0

708 1,946


forward exchange transactions and cross-currency swaps

2,331

129

interest rate swaps 2,918 2,123

5,249 2,252

Currency risks as of the reporting date are assessed using

sensitivity analyses. The sensitivity analysis approximately

quantifies the risk that may arise under the assumptions made

if certain parameters change. With respect to the currency

risks, it is analyzed what effect would arise from an increase

or decrease of 10% in the value of the euro against all other

currencies as of the reporting date.

With regard to trade receivables and payables, a 10% increase

or decrease in the value of the euro against all other currencies

as of December 31, 2011 would only have an immaterial effect

on consolidated net income for the year. In the event of a 10%

decrease in value of the euro, the market value of forward

exchange transactions would fall by € 5,529 thousand (prior

year: € 3,073 thousand). The market value of cross-currency

swaps would drop by € 382 thousand (prior year: € 1,032 thou-

sand) accordingly. In the event of a 10% increase in value

of the euro against all other currencies, the market value of

forward exchange transactions would rise by € 4,524 thousand

(prior year: € 2,514 thousand). The market value of cross-

currency swaps would increase by € 313 thousand (prior year:

€ 844 thousand) accordingly.

Interest rate risks may arise for investments in fixed-interest

securities. A 1% increase in interest rates would result in

a decrease in market value of € 1,095 thousand (prior year:

€ 911 thousand). A 1% decrease in interest rates would lead

to an increase in market value of € 1,129 thousand (prior year:

€ 937 thousand). Financial debt may also be exposed to an

155


interest rate risk. Derivative financial instruments are used on

a case-by-case basis to hedge against the interest rate risk. As

of the reporting date, there are interest rate swaps that hedge

against future increases in interest rates for the floating-interest

loans financing the operator’s license for the vehicle inspection

business in Turkey as well as the acquisition of the GRC group.

Both of these are cash flow hedges designated as such for

hedge accounting purposes in accordance with IAS 39. The

variable cash flows from these loans are exchanged for

fixed-interest cash flows via interest rate swaps. For financing

of the operator’s license, the hedge will be in place permanently

until the end of 2017 and interest is payable every six months.

Approximately 45% of cash flows have been hedged until May

2015 for financing the acquisition of the GRC group. Both cash

flow hedges were effective as of the reporting date. The recog-

nized negative fair value of these interest rate swaps amounts

to € –2,918 thousand as of the reporting date (prior year:

€ –2,123 thousand). A negative amount of € –991 thousand

was recognized in other comprehensive income in the fiscal

year 2011 (prior year: € –703 thousand). This change in value

reflects the effective portion of the hedges.

40 | NOTES TO ThE STATEmENT OF CASh FlOwS

The cash and cash equivalents presented in the statement

of cash flows contain all highly liquid items shown in the

statement of financial position, i.e., cash in hand, checks and

bank balances as well as current securities that are available

within three months. An amount of € 2 thousand (prior year:

€ 1,665 thousand) of the cash is pledged.

The net change in cash and cash equivalents that relate to

discontinued operations is presented separately in note 15.

The change in liabilities and provisions relates to pension

payments of € 43,144 thousand made by trustors and refunded

by TÜV SÜD Pension Trust e.V. (prior year: € 42,472 thousand).

The trustors subsequently made further payments to TÜV SÜD

Pension Trust e.V. again. Together with further additions to

other plan assets, these payments constitute contributions to

pension plans and are allocable to the cash flow from investing

activities.

41 | RElATED PARTIES

related companies

Related parties as defined by IAS 24 are legal entities or natural

persons who can exercise significant influence or control over

TÜV SÜD AG and its subsidiaries or, alternatively, are subject

to the control or significant influence of TÜV SÜD AG or its

subsidiaries.

The ultimate parent companies of the TÜV SÜD Group are

TÜV SÜD e.V., Munich, and TÜV SÜD Stiftung, Munich (»TÜV SÜD

Foundation«). Both TÜV SÜD e.V. and the TÜV SÜD Foundation

have transferred their shares in TÜV SÜD AG to the independent

shareholder committee, TÜV SÜD Gesellschafterausschuss GbR.

The purpose of the civil law association TÜV SÜD Gesellschafter-

ausschuss GbR, the interests in which are held by TÜV SÜD e.V.,

the TÜV SÜD Foundation and other natural persons as partners,

is to hold and manage investments under German stock corporation

law held in TÜV SÜD AG. Internally, TÜV SÜD e.V. and the TÜV SÜD

Foundation hold 74.9% and 25.1% stakes in the assets of TÜV SÜD

Gesellschafterausschuss GbR.

Within the framework of agency contracts, the activities under

the accreditation which authorizes TÜV SÜD to operate the road

vehicle technical inspectorate and the official vehicles inspection

body in Baden-Württemberg are carried out by the operating

companies of the TÜV SÜD Group for TÜV SÜD e.V., as principal

and recognized contractor. Business is conducted on behalf

of, at the instruction of and in the name of TÜV SÜD e.V. All

transactions and business processes are carried out in the

TÜV SÜD Group. The Group maintains personnel and material in

the scope necessary for the activities and operation. From

the cost center accounting, the revenue and costs allocable to

TÜV SÜD e.V. are calculated and transferred or invoiced. The

total volume charged to TÜV SÜD e.V. for the provision of

personnel and material came to € 122,989 thousand in 2011 (prior

year: € 119,919 thousand). TÜV SÜD e.V. recorded revenue of

€ 124,400 thousand (prior year: € 118,729 thousand) from this source.

As of December 31, 2011, TÜV SÜD AG recorded a cash pool

receivable of € 868 thousand (prior year: € 5,301 thousand) due

from TÜV SÜD e.V. Cash pool receivables of € 19 thousand (prior

156


year: € 0 thousand) from and cash pool liabilities of € 294 thou-

sand (prior year: € 1,104 thousand) to subsidiaries of TÜV SÜD

e.V. are reported as of the reporting date.

In the fiscal years 2011 and 2010, the TÜV SÜD Group had

business relationships with non-consolidated subsidiaries,

associated companies and joint ventures that qualify as

related parties. In the course of ordinary operations, all

service transactions with these entities were carried out at

arm’s length conditions. In 2011, transactions were carried

out with material related parties that led to the following

items in the consolidated financial statements:

Impairment losses of € 374 thousand (prior year: € 633 thou-

sand) were recognized on loans to non-consolidated

subsidiaries. Receivables from non-consolidated subsidiaries

include impairment losses amounting to € 3,522 thousand

(prior year: € 3,890 thousand).

Financial debt to non-consolidated subsidiaries stems from

the central borrowing or investment of cash at TÜV SÜD AG

(cash pooling). There is also a cash pool liability of € 699 thou-

sand (prior year: € 759 thousand) due to the welfare association

Belegschafts-Unterstützungsverein des TÜV Bayern e.V.,

Munich.

The business relationships with joint ventures are based

primarily on a license agreement between TÜVTURK Kuzey and

TÜVTURK Güney (licensors) and TÜV SÜD Bursa (licensee).

The dividend distributions by associated companies totaled

€ 581 thousand in the fiscal year 2011 (prior year: € 1,048 thou-

sand).

Transactions with TÜV SÜD Pension Trust e.V. are explained

in note 30 »Provisions for pensions and similar obligations«

and note 40 »Notes to the statement of cash flows«.

TÜV SÜD AG issued letters of comfort for two related companies.

No other guarantees were made for related parties in the

reporting year (prior year: € 953 thousand).

remuneration of the active Board of management and

supervisory Board

The remuneration of key management personnel in the Group

that is subject to mandatory disclosure pursuant to IAS 24

comprises the remuneration of the active Board of Manage-

ment and Supervisory Board.

The remuneration of the active members of the Board of

Management amounted to a total of € 3,778 thousand in fiscal

2011 (prior year: € 4,015 thousand including the severance

payment for a member who left the Board of Management

during the year). The additional service cost incurred for

pension obligations amounted to € 146 thousand (prior year:

€ 73 thousand). The present value of the defined benefit obligation

calculated in accordance with IFRSs amounted to € 2,994 thou-

sand as of the reporting date (prior year: € 2,682 thousand).

The active members of the Supervisory Board received total

remuneration of € 838 thousand in fiscal 2011 (prior year:

€ 923 thousand).

non-consolidated

subsidiaries

associated companies

Joint ventures


loans 215 1,080 0 0 0 0

receivables 2,567 3,567 96 307 0 1,813

financial debt 501 287 0 0 0 0

liabilities 2,008 1,827 56 11 176 1,821

T 63 iTems of The sTaTemenT of finanCial posiTion from TransaCTions wiTh non-ConsolidaTed subsidiaries, assoCiaTed Companies and JoinT venTures

157


As in the prior year, no loans or advances were granted to

members of the Board of Management or Supervisory Board

as of the reporting date. Also, as in the prior year, no contingent

liabilities were assumed in favor of these persons.

remuneration of former members of the Board of

management and supervisory Board

The total remuneration of former members of the Board of

Management and their surviving dependants including

pension payments and other payments (advisory services)

amounted to € 953 thousand (prior year: € 933 thousand).

Pension obligations (DBOs) amounting to € 11,376 thousand

(prior year: € 11,718 thousand) are in place with regard

to former members of the Board of Management and their

surviving dependants.

Former members of the Supervisory Board did not receive any

remuneration in the reporting year.

42 | PROPOSAl FOR ThE APPROPRIATION OF PROFITS

The Board of Management and Supervisory Board will propose

to the annual general meeting to distribute € 2,080 thousand

from the retained earnings under German GAAP of TÜV SÜD

AG totaling € 8,713 thousand. That is equivalent to € 0.08 per

share. The remaining amount of € 6,633 thousand is to be

transferred to other revenue reserves.

43 | AuDITOR’S FEES

The following fees for services rendered by KPMG AG

Wirtschaftsprüfungsgesellschaft in the fiscal year 2011 were

recognized as an expense in accordance with Section 314

(1) No. 9 HGB:

T 64 audiTor’s fees

in €‘000 2011 2010*

audits of the financial statements 723 697

other attestation services 24 49

tax advisory services 1,144 998

other services 335 718

2,226 2,462

* restated prior-year figures

In the prior year, the fees disclosed related to KPMG AG and

to its affiliated companies in KPMG Europe LLP. According to

a changed interpretation of the HGB provision, the disclosure

is only supposed to refer to the legally independent entity of

the auditor appointed. The prior-year figures were restated

accordingly.

158


44 | CONSOlIDATED ENTITIES

T 65 ConsolidaTed enTiTies

share in capital %

name and registered offices of the entity

fully consolidated affiliated companies – germany

armat Gmbh & Co. KG, Pullach i. isartal *) SPE 100

armat hessen Gmbh & Co. KG, Pullach i. isartal *) SPE 100

armat südwest Gmbh & Co. KG, Pullach i. isartal *) SPE 100

auto-Pflegezentrum Gmbh & Co. KG, darmstadt *) 100

eCoPlan deutschland institut für umweltschutz Gmbh, donzdorf 100

elektro-Beratung Bayern Gmbh, landwirtschaftlicher Prüfdienst, munich 100

fld fleet logistics deutschland Gmbh, mainz F 100

fleetCompany Gmbh, oberhaching 100

lsG-elaB Gmbh, siegen 100

lsG-hygiene institute Gmbh, neu-isenburg 75

Penders & Janßen Gmbh, oberhausen F 100

Pima-mPu Gmbh, munich *) 100

siGnon deutschland Gmbh, Berlin 74.95

tÜV ecoplan umwelt Gmbh unternehmensgruppe tÜV süddeutschland, munich 100

tÜV hanse Gmbh tÜV sÜd Gruppe, hamburg *) 90

tÜV hessen mobilität und Beratung Gmbh, Bad homburg v.d.h. 100

tÜV sÜd administration services Gmbh, munich 100

tÜV sÜd akademie Gmbh, munich *) 100

tÜV sÜd auto Partner Gmbh, hamburg *) 100

tÜV sÜd auto Plus Gmbh, stuttgart 100

tÜV sÜd auto service Gmbh, stuttgart *) 100

tÜV sÜd automotive Gmbh, munich *) 100

tÜV sÜd Battery testing Gmbh, Garching F 70

tÜV sÜd Car registration & services Gmbh, munich F 50

tÜV sÜd Chemie service Gmbh, leverkusen *) 100

tÜV sÜd Cleancert Gmbh, Bergisch Gladbach *) 100

tÜV süd energie und umwelt Gmbh, munich 100

tÜV sÜd energietechnik Gmbh Baden-württemberg, filderstadt *) 100

tÜV sÜd immobilien service Gmbh, munich *) 100

tÜV sÜd immowert Gmbh, munich *) 100

tÜV sÜd industrie service Gmbh, munich *) 100

tÜV sÜd informatik und Consulting services Gmbh, munich *) 100

tÜV sÜd life service Gmbh, munich *) 100

tÜV sÜd management service Gmbh, munich *) 100

tÜV sÜd Pluspunkt Gmbh, munich *) 100

tÜV sÜd Product service Gmbh, munich 100

tÜV sÜd rail Gmbh, munich 100

tÜV sÜd senton Gmbh, straubing 100

tÜV sÜd umwelt Gmbh, munich 100

tÜV sÜd umwelt messtechnik Gmbh, munich 100

tÜV technische Überwachung hessen Gmbh, darmstadt 55

159


share in capital %


fully consolidated affiliated companies – other countries

arise inc., wilmington, delaware, usa 100

Émi-tÜV sÜd minöségügvi és Biztonságtechnikai Korlátolt felelösségü társaság, szentendre, hungary 62.13

Global risk Consultants Corp., wilmington, delaware, usa 100

Global risk Consultants ltd., west Byfleet, surrey, uK 100

GrC merlin holdings, inc., wilmington, delaware, usa 100

Jiangsu tÜV Product service ltd., wuxi, China 51

Kocen Consulting & services, inc., seongnam-si, south Korea 100

laidler associates Consulting service limited, farham hants, uK 100

magyar tÜV sÜd müszaki szakértoi Korlátolt felelösségü társaság, szentendre, hungary 100

nuclear technologies plc., Gloucester, uK 100

PetroChem inspection services inc., Pasadena, texas, usa 100

Pro-tec Boiler inspection & ndt services (Pty) ltd., middelburg, south africa F 100

PsB management Consulting (shanghai) Co. ltd., shanghai, China 100

safety systems technology limited, farham hants, uK 100

siGnon schweiz aG, Berne, switzerland F 100

tÜV italia s.r.l., milan, italy 100

tÜV sÜd (uK) ltd., fareham hants, uK 100

tÜV sÜd américa de méxico s.a. de C.V., monterrey n.l., mexico 100

tÜV sÜd america inc., danvers, massachussets, usa 100

tuV sud asia ltd., shatin, hong Kong 100

tuV sud asia Pacific Pte. ltd., singapore 100

tuV sud Bangladesh (Pvt.) ltd., dhaka, Bangladesh F 100

tÜV sÜd Benelux B.V.B.a., Baal, Belgium 100

tÜV sÜd Bursa tasit muayene istasyonlari isletim a.s., osmangazi-Bursa, turkey 100

tÜV sÜd Canada inc., Guelph, ontario, Canada 100

tÜV sÜd Central eastern europe s.r.o., Prague, Czech republic 100

tuV sud China holding ltd., shatin, hong Kong 100

tÜV sÜd Czech s.r.o., Prague, Czech republic 100

tÜV sÜd france s.a.s., ecully, france F 100

tuV sud hong Kong ltd., shatin, hong Kong 100

tÜV sÜd lberia, s.l.u., Barcelona, spain 100

tuV sud industry service, inc., dover, delaware, usa 100

tuV sud industry services madagascar s.a., antananarivo (renivohitra), madagascar F 100

tuV sud invest lP, atlanta, Georgia, usa 100

tuV sud invest management llC, dover, delaware, usa 100

tÜV sÜd Japan ltd., tokyo, Japan 100

tuV sud Korea ltd., seoul, south Korea 100

tÜV sÜd landesgesellschaft Österreich Gmbh, Jenbach, austria 100

tuV sud middle east llC (qatar), doha, qatar 100

tuV sud middle east llC, abu dhabi, united arab emirates 51

tuV sud nel limited, Glasgow, uK 100

tÜV sÜd Polska sp. z.o.o., warsaw, Poland 100

tuV sud Product service ltd., fareham hants, uK 100

160


Munich, March 27, 2012

TÜV SÜD AG

The Board of Management

Dr. Axel Stepken Dirk Eilers Dr. Peter Klein Horst Schneider Karsten Xander

share in capital %


tuV sud PsB (malaysia) sdn. Bhd., Kuala lumpur, malaysia 100

tuV sud PsB (thailand) ltd., Pathumthani, thailand 100

tuV sud PsB learning Pte. ltd., singapore 100

tÜV sÜd PsB Products testing (shanghai) Co., ltd, shanghai, China F 100

tuV sud PsB Pte. ltd., singapore 100

tuV sud PsB Vietnam Co. ltd., ho Chi minh City, Vietnam 100

tÜV sÜd romania s.r.l., Bucharest, romania 100

tÜV sÜd russland o.o.o., moscow, russia F 100

tÜV sÜd sava d.o.o., ljubljana, slovenia 100

tuV sud serbia d.o.o., Belgrade, serbia F 100

tÜV sÜd slovakia s.r.o., Bratislava, slovakia 100

tuV sud south africa holding (Pty) ltd., Cape town, south africa F 100

tuV sud south asia Pte. ltd., mumbai, india 100

tÜV sÜd sZa Österreich technische Prüf-Gmbh, Vienna, austria 50

tÜV sÜd teknik Güvenlik ve Kalite denetim ticaret ltd. sirketi (tGK), esentepe (istanbul), turkey 100

wallace whittle (holdings) limited, Glasgow, uK F 100

wallace whittle limited, Glasgow, uK F 100

ZwP - Zerstörungsfreie werkstoffprüfung Gmbh, Vienna, austria 100

consolidated associated companies – other countries

seCta société européenne de Contrôle technique automobile s.a., Courbevoie Cedex, france 38.22

swiss ts technical services aG, wallisellen, switzerland 49.01

tÜV sÜd ohtama ltd., tokyo, Japan 50

consolidated joint ventures – other countries

tÜVturK Güney tasit muayene istasyonlari yapim ve isletim a.s., istanbul, turkey 33,33

tÜVturK istanbul tasit muayene istasyonlari yapim ve isletim a.s., istanbul, turkey 16.80

tÜVturK Kuzey tasit muayene istasyonlari yapim ve isletim a.s., istanbul, turkey 33.33

f = first-time consolidation

sPe = special Purpose entity

*) the domestic subsidiary meets the requirements of section 264 (3) hGB or section 264b hGB, and takes advantage of the corresponding exemption regulations.

161


auditor’s rePort

»We have audited the consolidated financial statements pre-

pared by TÜV SÜD AG, Munich, comprising the consolidated

income statement, consolidated statement of comprehensive

income, consolidated statement of financial position, con-

solidated statement of cash flows, consolidated statement of

changes in equity and the notes to the consolidated financial

statements, together with the combined management report

of TÜV SÜD Group and TÜV SÜD AG for the business year

from January 1 to December 31, 2011. The preparation of the

consolidated financial statements and the group manage-

ment report in accordance with IFRSs, as adopted by the EU,

and the additional requirements of German commercial law

pursuant to § 315a Abs. 1 HGB [Handelsgesetzbuch: »German

Commercial Code«] are the responsibility of the parent

company’s management. Our responsibility is to express an

opinion on the consolidated financial statements and on

the management report based on our audit.

We conducted our audit of the consolidated financial state-

ments in accordance with § 317 HGB and German generally

accepted standards for the audit of financial statements

promulgated by the Institut der Wirtschaftsprüfer [Institute of

Public Auditors in Germany] (IDW). Those standards require

that we plan and perform the audit such that misstatements

materially affecting the presentation of the net assets, financial

position and results of operations in the consolidated

financial statements in accordance with the applicable financial

reporting framework and in the group management report

are detected with reasonable assurance. Knowledge of the

business activities and the economic and legal environment

of the Group and expectations as to possible misstatements are

taken into account in the determination of audit procedures.

The effectiveness of the accounting-related internal control

system and the evidence supporting the disclosures in the

consolidated financial statements and the group management

report are examined primarily on a test basis within the

framework of the audit. The audit includes assessing the

annual financial statements of those entities included in

consolidation, the determination of entities to be included in

consolidation, the accounting and consolidation principles

used and significant estimates made by management, as well

as evaluating the overall presentation of the consolidated

financial statements and group management report. We believe

that our audit provides a reasonable basis for our opinion.

Our audit has not led to any reservations.

In our opinion, based on the findings of our audit, the consoli-

dated financial statements comply with IFRSs, as adopted by

the EU, the additional requirements of German commercial law

pursuant to § 315a Abs. 1 HGB and give a true and fair view of

the net assets, financial position and results of operations of

the Group in accordance with these requirements. The group

management report is consistent with the consolidated

financial statements and as a whole provides a suitable view

of the Group’s position and suitably presents the opportunities

and risks of future development.«

Munich, March 27, 2012

KPMG AG

Wirtschaftsprüfungsgesellschaft

huBER SANDhAAS

Wirtschaftsprüfer Wirtschaftsprüferin

[German Public Auditor] [German Public Auditor]

162


CorPorate Boards

suPerVisory BoardPROF. DR.-ING. hANS-JöRG BullINGER

Chairman

President of Fraunhofer-Gesellschaft

FRANz hOlzhAmmER*

Deputy Chairman

Chairman of the central works council of TÜV SÜD AG

FRANk-PETER ARNDT

Member of the Board of Management of BMW AG

JOSEF BIChlER*

Head of Corporate Controlling of TÜV SÜD AG

DR. ChRISTINE BORTENläNGER

Member of the Board of Management of Bayerische Börse AG

(since May 13, 2011)

wOlFGANG DEhEN

Chairman of the Board of Management of OSRAM AG

mIChAEl DICk

Member of the Board of Management of AUDI AG

ThOmAS EDER*

Chairman of the works council of TÜV SÜD Auto Service GmbH

PETER kARDEl*

Chairman of the works council of TÜV SÜD Industrie

Service GmbH

ThOmAS kOPPOlD*

Expert at TÜV SÜD Industrie Service GmbH

zyGmuNT mIERDORF

Member of the Board of Management of METRO AG (retired),

(until May 13, 2011)

REINhOlD RIEGER*

Expert at TÜV SÜD Industrie Service GmbH

(since January 1, 2012)

DIETRICh SChAllEhN*

Trade union secretary for sector 13

»Special services« on the national executive board of ver.di

EDGAR SChERNER*

Former chairman of the central works council of TÜV SÜD AG

JOhANN SChwAIGER*

Chairman of the works council of TÜV SÜD Industrie

Service GmbH

(until December 31, 2011)

GEROlD TANDlER

Member of the Board of Management of Linde AG (retired)

DR. EBERhARD VEIT

Chairman of the Board of Management of Festo AG

DR. mANFRED wITTENSTEIN

Chairman of the Board of Management of WITTENSTEIN AG

* Employee representative

Board of manaGementDR.-ING. AxEl STEPkEN

Chairman of the Board of Management

DIRk EIlERS

Member of the Board of Management

DR. PETER klEIN


hORST SChNEIDER


kARSTEN xANDER


163


ImprInt


phone / +49 (0)89 5791-0 fax / +49 (0)89 5791-1551











Division


∆

∆

InDuSTRY SeRVICeS


RAIl

InDuSTRY

TÜV SÜD

PRODuCT SeRVICeS

MAnAGeMenT SeRVICeS

ACADeMY

CeRTIFICATIOn

1,271

1,356

1,410

1,553

1,678

2007

2008

2009*

2010*

2011*





AuTO SeRVICeS

AuTOMOTIVe

MOBIlITY

lIFe SeRVICeS

F 02 HEADCOUnt

13,185

2007

14,138

2008

16,058

2010*

14,459

2009* 2011*

17,161

t 01 KEY FIGUrES


2007 2008 2009* 2010* 2011*



Revenue 1,270.7 1,365.2 1,409.9 1,552.5 1,677.7






eBT margin (%) 9.1 7.8 7.2 7.9 8.0


eBIT margin (%)** 9.1 8.9 8.7 9.2 9.5




Current assets 377.5 413.6 494.0 551.3 605.9

Total assets 1,093.7 1,162.6 1,255.7 1,374.5 1,430.0

equity ratio (%) 26.9 32.5 32.0 34.3 37.7




Headcount 13,185 14,138 14,459 16,058 17,161



CeRTIFICATIOn 24.9

InDuSTRY 39.6

MOBIlITY 35.4

OTHeR 0.1

2011

* Before taxes


expenditures

Tüv Süd Ag


Germany

Munich USA

PhiladelPhia

South Africa

CAPE TOWN

33° 55' s 18° 25' E

39° 57' N 75° 10' w

48° 09' N 11° 35' E

India

New delhi

28° 40' N 77° 13' E



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48° 09' N 11° 35' E

33° 55' s 18° 25' E

28° 40' N 77° 13' E

39° 57' N 75° 10' w

Documents

CLOSE-UP Annual Report 2011 CLOSE-Up Annual report 2011