Company description: Measuring light
m-u-t AG is a vertically integrated group that designs and manufactures non-contact, non-destructive optical measurement tools. These range from individual instruments such as spectrometers and light sources (Avantes), through complete spectrometry systems (tec5) to complete customised turnkey system solutions (m-u-t GmbH) and highly specialist systems for use in power plants, the board industry and industrial drying processes (APOS). The design of these products requires specialist skills in spectrometric in-process analytics, measurement and automation technology. The products are deployed in a diverse range of applications areas including industrial sensing, agriculture, laboratory automation, medical technology, early fire detection and transportation. These follow independent cycles, giving the group resilience against a potential downturn in any one market.
Exhibit 1: Group structure
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The original company in the portfolio, m-u-t GmbH, develops customised system solutions based on non-contact measurement technology. It was founded in 1995 and listed in 2007. Since then the group has pursued a “buy-and-build” strategy. In 2007 m-u-t acquired a 51% stake in tec5, a developer of UV/VIS/NIR and RAMAN measurement systems for process applications. In 2008 it acquired a 51% stake in Avantes, a developer of miniaturised fibre optic spectroscopy instruments. In August 2016, it acquired a 55% stake in APOS, a developer of optical measurement solutions for the wood processing power generation and industrial drying sectors. Since the original investment, the holding company has increased its holdings in both tec5 and Avantes.
m-u-t AG employs around 250 people, approximately one-third of whom are development engineers. It is headquartered in Wedel, near to Hamburg in northern Germany, where the m-u-t GmbH and APOS subsidiaries are located. Avantes is based in Apeldoorn, the Netherlands, and tec5 in Oberursel, Germany. Products are manufactured in house at each of these subsidiary sites as well as at the tec5 operation in the US and the Avantes operation in China. There are also sales office in China, Hong Kong, the UK and the US. The route to market varies with level of integration. Avantes generates around half of its revenues from direct sales to customers. The other subsidiaries sell predominantly to OEMs. Although the group is highly vertically integrated, the products are sold under the brands of their respective subsidiaries or the OEM brand name. While each subsidiary has a dedicated salesforce, cross-selling is encouraged.
m-u-t’s smart photonics solutions are based on a platform deploying a fibre optic spectroscopy. This analyses the different wavelengths in the light striking the sensor, detecting light from the ultraviolet end of the spectrum, through visible wave lengths to the near infrared end of the spectrum. This spectral information is passed into customised process control systems to create complete turnkey solutions for OEMs serving the life science, clean tech and green tech sectors. A high degree of efficiency is derived from using the same basic platform, scaled up if required, in different application areas. We note that the non-sector specific nature of its products means that Avantes is not always aware which sector its optical instruments are deployed in. Those revenues where the sector is not known are placed in the ‘other’ category.
Exhibit 2: Revenues by segment FY16
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Exhibit 3: Revenues by geography FY16
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Exhibit 2: Revenues by segment FY16
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Exhibit 3: Revenues by geography FY16
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m-u-t offers a wide range of automation solutions that make medical diagnostics more effective and efficient. Many hundreds of large laboratories worldwide use OEM devices that incorporate m-u-t’s proven, reliable and patented step conveyor, which can handle up to 2,000 test tubes per hour. This module is accompanied by decappers and recappers that can handle up to 1,500 tubes/hour. Customised equipment developed for specific customers includes input-output modules for analysis equipment, which not only transfers the tubes from a bulk loader to a puck on the track system in such a way that the barcodes are aligned, but also reads the barcodes and identifies the cap colour and tube geometry, passing these data to the control software. The spectroscopic equipment is beginning to be used to measure blood parameters.
m-u-t is also involved in instrument sterilisation. This is particularly important with the rise of nosocomial infections such as those caused by MRSA, which provide healthcare systems with new challenges. m-u-t’s systems are characterised by a high process speed and sustainable reliability. They are able to withstand extremes and large fluctuations in temperature, high mechanical stress and contact with strong chemicals used for disinfecting apparatus. For example, m-u-t has developed solutions for reprocessing flexible endoscopes, identifying which instruments have passed through the appropriate sterilisation equipment by means of RFID technology. Another example is a protein analyser that enables the automatic measurement of protein levels in an instrument sterilisation system, giving immediate quality control over the process. This protein analyser offers some very interesting possibilities in medical diagnostics. It may also be used to detect proteins present in water or air samples.
For over 20 years m-u-t has offered its customers expertise in developing optical measurement solutions over a wide spectral range. The information on the spectrum can be analysed to determine the quality of coatings on glass, plastic foils or metal sheets, film thickness, moisture concentration, sheet resistance and colour, the concentration of gases and surface temperature. These data are extremely useful in building a process control system. m-u-t creates customised solutions that are used by a wide range of industrial producers and plant operators to optimise processes and generate sustainable cost savings. These include production control of integrated circuits, LEDs and displays; in-line measurement of coatings on photovoltaic cells; monitoring biogas plants; purifying water in the third world; monitoring and regulating UV light sources used to cure inks; measuring the thickness and electrical property of individual layers during the manufacture of photovoltaic cells; detecting counterfeit or adulterated gasoline; monitoring the quality of recycled water; checking for bacteria and toxins in food; and saving water when operating sanitary facilities in railway trains. Control systems on trains are subject to industry-specific regulations, making this a very defendable niche. More generally, this ability to monitor and control processes is a key element of fully automated or smart factories, often referred to as Industry 4.0.
m-u-t’s early fire detection system combines video surveillance, temperature measurement, alarm and extinguishing in a single application. It checks the monitored area automatically and continuously, monitoring set temperature limits and temperature trends. Full system integration means that the data regarding the exact location of the hot area are used to direct water or other material used to extinguish the fire. By monitoring surfaces using long-wave infrared detectors, the system gives a warning of thermal abnormalities before other commercially available systems can, allowing remedial action to be taken.
m-u-t’s optical measuring technology is deployed in agricultural applications for real-time analysis of moisture content and substances such as starch, protein, fat, sugar, ash and plant nutrients. The technology is used to check the nutritional content of freshly harvested, still partially damp crops such as maize, grass, alfalfa, corn maize, cereals and oilseeds. Similarly, the amount of useful fertiliser ingredients such as nitrogen, ammonium nitrogen and potassium oxide in slurry and solid manure can be determined. In the area of soil sensors and soil analysis, m-u-t’s technology is deployed in customised multi-sensor systems, for example monitoring moisture content, pH levels, humus content, soil texture and the level of nutrients such as nitrogen and phosphate, then analysing that data to determine the amount of fertiliser to apply. This more sophisticated approach to farming is becoming increasingly important as farmers seek greater efficiencies to improve profits. It is also important on a global scale as farmers need to get a better yield from agricultural inputs to meet the demands of an expanding world population.
m-u-t’s technology is used in environmental and processing plants to measure the amount of phosphates and nitrates in sewage effluent to ensure that it is compliant with environmental regulations. This information may be stored for documentation purposes as well as being fed back into the control system regulating the processing of the effluent. The technology is also deployed to measure the calorific value of waste material, fresh wood or sewage sludge used in waste-to-energy plants so that operators can pay suppliers according to the energy content of the material rather than the tonnage. It is used to monitor the moisture content when drying sewage sludge or other organic materials, thus optimising the energy used. m-u-t’s spectrometric systems are also used to sort vegetables and fruit.
Over the last three years management has transformed the company into one delivering sustainable profitable growth. Management instigated a range of programmes to focus the business on the provision of a full-service offer for OEMs that generated profits: automating more production processes at Avantes; strengthening tec5’s digitalisation capability; upgrading the salesforce; discontinuing unprofitable product lines; changing the management at m-u-t GmbH; and renegotiating supplier contracts. As part of this transformation, in November 2015 management sold its loss-making “direct-to-customer” laboratory automation business to Sarstedt Group.
Looking forward, management expects to achieve steady sales and earnings growth in the medium term. It intends to deliver this through a combination of organic growth, especially in the clean tech segment, and acquisition, thereby broadening the product portfolio and deriving further benefit from vertical integration.