Frank­furt am Main — Deut­sche Betei­li­gungs AG (DBAG) intends to conti­nue growing: The net asset value of private equity invest­ments is expec­ted to increase by an average of between 14 percent and 19 percent in the current and the two follo­wing finan­cial years, while earnings from fund advi­sory services are expec­ted to reach a double-digit million euro amount in each case. This is accor­ding to the listed private equity company’s medium-term plan­ning published today with the Group’s 2019/2020 annual finan­cial report.

The basis for this growth is signi­fi­cantly higher invest­ments by DBAG along­side the funds it advi­ses, as well as invest­ments finan­ced exclu­si­vely from DBAG’s balance sheet: While an average of around 72 million euros has flowed into invest­ments in mid-market compa­nies over the past five years, around 120 million euros are plan­ned annu­ally until 2023. “If nothing else, the Covid 19 pande­mic is opening up invest­ment oppor­tu­ni­ties that we intend to target,” said DBAG CEO Tors­ten Grede, adding, “We have expan­ded our plat­form for equity solu­ti­ons in the midmar­ket and inves­ted in our invest­ment team.”

Net asset value of private equity invest­ments impac­ted by pande­mic in 2019/2020
Accor­ding to the plan­ning, DBAG’s growth will acce­le­rate: Between 2014 and 2019, the net asset value of private equity invest­ments had increased by around 13 percent annu­ally. It is expec­ted to grow by up to 19 percent per year until 2023. The growth would also more than offset the setback expe­ri­en­ced in net asset value due to the impact of the pande­mic on port­fo­lio compa­nies in fiscal year 2019/2020 (Oct. 1‑Sept. 30). At 422.0 million euros, adjus­ted for the effect of the distri­bu­tion to share­hol­ders, it fell 5.8 percent short of the previous year’s figure, but reached the upper end of the fore­cast revi­sed after the Corona shock in the spring. In parti­cu­lar, share­hol­dings with a strong link to indus­try suffe­red in some cases heavy losses in reve­nues and earnings and did not achieve their origi­nal budgets; this resul­ted in corre­spon­ding impairm­ents of these share­hol­dings. Once again, invest­ments in broad­band tele­com­mu­ni­ca­ti­ons or soft­ware compa­nies, which are bene­fiting from the acce­le­ra­ted digi­tiza­tion in many areas of life and busi­ness models, deve­lo­ped encouragingly.

Due to the special nature of its private equity busi­ness, DBAG does not manage its busi­ness using tradi­tio­nal annual perfor­mance indi­ca­tors such as EBIT or return on sales. Instead, the key perfor­mance indi­ca­tors are the varia­bles that DBAG can influence and that deter­mine the value of the two busi­ness areas of private equity invest­ments and fund advi­sory services — the net asset value of private equity invest­ments and the result of fund advi­sory services. Accor­din­gly, conso­li­da­ted net profit is not a key perfor­mance indi­ca­tor; it amounts to ‑16.8 million euros, driven by the
Perfor­mance of private equity invest­ments. This segment closed 2019/2020 with earnings before taxes of ‑25.2 million euros, down 67.3 million euros on the previous fiscal year.

Key figu­res (IFRS) 2019/2020 2018/2019
Segment result Private Equity Invest­ments -€25.2 million €42.1 million
Segment result Fund Consul­ting €9.5 million €3.0 million
Net asset value € 422.0 million € 472.1 million
Net result -€16.8 million €45.9 million
Divi­dend (2019/2020: propo­sed) €0.80 €1.50

Fund consul­tancy bene­fits from the launch of the new DBAG fund
Earnings in the second segment, fund advi­sory services, excee­ded expec­ta­ti­ons: at 9.5 million euros, they reached their highest level since the intro­duc­tion of segment report­ing in 2013/2014. The basis for the signi­fi­cant increase compared with the previous year (€3.0 million) is higher income from the fund busi­ness and lower provi­si­ons for varia­ble compen­sa­tion — this prima­rily reflects the perfor­mance of the port­fo­lio. Income was signi­fi­cantly higher (€30.6 million after €28.2 million) because DBAG has also been recei­ving income for advi­sing DBAG Fund VIII since its launch in August 2020.

The fund had been closed in May with a volume of 1.109 billion euros. As a result, the assets advi­sed and mana­ged by DBAG, which form the basis for measu­ring income from the fund busi­ness, rose to around €2.6 billion (Septem­ber 30, 2019: €1.7 billion).

Divi­dend propo­sal: 0.80 euros per share
The divi­dend propo­sal for the past finan­cial year — 0.80 euros per share — does not imply any change in DBAG’s divi­dend policy. “It prima­rily takes into account the expec­ted later returns from the port­fo­lio as a result of longer holding peri­ods for our indus­trial holdings,” said CFO Susanne Zeid­ler, explai­ning the propo­sal. He added: “We expect that as the econo­mic envi­ron­ment norma­li­zes after the pande­mic subs­i­des, we will be able to return to our policy of stable and, when­ever possi­ble, rising divi­dends next year with a divi­dend of between 1.00 and 1.20 euros per share.” The divi­dend propo­sal corre­sponds to a yield of 2.4 percent based on the average price of DBAG shares for the year.

Invest­ment decis­i­ons trig­ge­red for 314 million euros
DBAG’s invest­ment team has trig­ge­red invest­ment decis­i­ons of 314 million euros in 2019/2020. Three of these invol­ved manage­ment buyouts (MBOs) struc­tu­red for the new fund within the first two months of its invest­ment period. In addi­tion, there was another MBO with DBAG Fund VII and a first long-term invest­ment — a mino­rity stake in a fast-growing company, finan­ced exclu­si­vely from DBAG funds. Six port­fo­lio compa­nies grew stron­gly through a total of 14 corpo­rate acqui­si­ti­ons; these acqui­si­ti­ons, mainly finan­ced by the port­fo­lio compa­nies them­sel­ves, serve to acce­le­rate the imple­men­ta­tion of the stra­te­gic deve­lo­p­ment of the port­fo­lio companies.

96.8 million of the invest­ment decis­i­ons were finan­ced by DBAG from its own balance sheet. This included €5.2 million for seven port­fo­lio compa­nies that were hit harder than average by the Corona pande­mic; the addi­tio­nal equity was used to support debt finan­cing solu­ti­ons to improve the finan­cial resour­ces of these companies.

Equity ratio remains very high at 89 percent
DBAG has a solid balance sheet with an equity ratio of around 89 percent. Cash and cash equi­va­lents decreased shar­ply compared with the previous year as a result of the high level of capi­tal expen­dit­ure. Once again, these signi­fi­cantly exceed the reco­veries from the port­fo­lio. With the conclu­sion of a further credit line, DBAG increased its finan­cial room for maneu­ver by 40 million euros. In 2019/2020, DBAG was able to add six invest­ments to its port­fo­lio, inclu­ding the MBOs of Carton­plast and the DING Group, which had alre­ady been agreed in 2018/2019. One company left the port­fo­lio; this dispo­sal had also been agreed in the previous year. The two (partial) dispo­sals agreed in 2019/2020 will not take effect until the new fiscal year. As of Septem­ber 30, the port­fo­lio consis­ted of 32 invest­ments in compa­nies of the (predo­mi­nantly) German Mittelstand.

“Stra­te­gic inte­rest in mature holdings”
The DBAG Manage­ment Board is confi­dent for the new, current 2019/2020 finan­cial year and beyond. “Our posi­tion in the market is good, we can have about one billion of capi­tal ready to invest and invest in new invest­ments,” the report conti­nues. In view of the ongo­ing pande­mic, DBAG intends to place parti­cu­larly high demands on the quality of the busi­ness model, its stra­te­gic importance and the growth of the respec­tive market when asses­sing invest­ment oppor­tu­ni­ties. “Invest­ments from the IT services and soft­ware and broad­band tele­com­mu­ni­ca­ti­ons sectors are the main candi­da­tes for this, but also Indus­try­Tech compa­nies,” says board spokes­man Grede, “for exam­ple, manu­fac­tu­r­ers of such indus­trial compon­ents whose products make auto­ma­tion, robo­tics and digi­tiza­tion possi­ble in the first place.” In addi­tion, DBAG intends to address invest­ment oppor­tu­ni­ties in compa­nies in special situa­tions, i.e. those with perfor­mance-rela­ted equity requirements.

Due to the econo­mic weak­ness that has persis­ted in parts of the indus­try for some time, dispo­sals have recently been delayed. The DBAG port­fo­lio conta­ins a number of compa­nies that have been supported for a longer period of time; change proces­ses that were initia­ted at the start of the invest­ment are well advan­ced. “We are expe­ri­en­cing inte­rest from stra­te­gic inves­tors in such invest­ments,” CFO Zeid­ler said today. And further: “Howe­ver, should dispo­sals and corre­spon­ding returns be further delayed, the addi­tio­nal credit line gives us flexi­bi­lity to take advan­tage of attrac­tive invest­ment oppor­tu­ni­ties at any time — in addi­tion, we are exami­ning other finan­cing opti­ons, for exam­ple on the equity side.”

About DBAG
Deut­sche Betei­li­gungs AG, a listed company, initia­tes closed-end private equity funds and invests — predo­mi­nantly along­side DBAG funds — in well-posi­tio­ned medium-sized compa­nies with poten­tial. DBAG focu­ses on indus­trial sectors in which German SMEs are strong by inter­na­tio­nal stan­dards. An incre­asing propor­tion of equity invest­ments are in compa­nies in new growth sectors such as broad­band tele­com­mu­ni­ca­ti­ons, IT services/software and health­care. The long-term, value-enhan­cing entre­pre­neu­rial invest­ment approach makes DBAG a sought-after invest­ment part­ner in the German-spea­king region. Capi­tal mana­ged and advi­sed by the DBAG Group amounts to 2.6 billion euros