Frank­furt am Main — Deut­sche Betei­li­gungs AG (DBAG) closes the first nine months of finan­cial year 2018/2019 with conso­li­da­ted earnings of 12.6 million euros. The reason for the signi­fi­cant decline compared to the corre­spon­ding period of the previous year, when conso­li­da­ted net income amoun­ted to 27.7 million euros, is the lower result from the invest­ment busi­ness: A lower valua­tion result could not be fully compen­sa­ted by posi­tive earnings contri­bu­ti­ons from disposals.

In its 2018/2019 half-year report, DBAG had repor­ted that most port­fo­lio compa­nies had budgeted for higher reve­nues and earnings in 2019 and conside­red them­sel­ves to be on a good track. This has not chan­ged in prin­ci­ple. In the mean­time, howe­ver, there have been incre­asing signs of a slow­down in econo­mic momen­tum — partly due to the simme­ring global trade conflicts. This leads to lower than expec­ted earnings at some port­fo­lio compa­nies and thus has a nega­tive impact on the valua­tion of the port­fo­lio compa­nies and earnings from the invest­ment busi­ness. In the third quar­ter of the current fiscal year in parti­cu­lar, there was also a nega­tive earnings contri­bu­tion from the change in the debt of the port­fo­lio compa­nies. In the case of one port­fo­lio company, for exam­ple, the finan­cing of an acqui­si­tion had impac­ted its leverage ratio and subse­quently its valuation.

Howe­ver, the fact that DBAG’s port­fo­lio is diver­si­fied is paying off. “The econo­mic slow­down in various sectors contrasts with posi­tive deve­lo­p­ments at port­fo­lio compa­nies in other sectors. For exam­ple, invest­ments in the tele­com­mu­ni­ca­ti­ons sector with a focus on fast inter­net have recently deve­lo­ped very posi­tively,” states DBAG’s quar­terly state­ment published today. On balance, the opera­ting perfor­mance of the port­fo­lio compa­nies, i.e. the change in earnings and debt, contri­bu­ted 6.2 million euros to earnings in the first nine months, compared with 13.3 million euros in the corre­spon­ding prior-year period.

The dispo­sals of the share­hol­dings in Infiana and Novo­press, which were agreed after the report­ing date, made a posi­tive contri­bu­tion of 13.7 million euros to the conso­li­da­ted result. In both cases, the proceeds from the sale excee­ded the carry­ing amount of the invest­ments as of March 31, 2019. The corre­spon­ding value contri­bu­ti­ons were included in the valua­tion of the two invest­ments as of June 30, 2019. “The recently announ­ced dispo­sals once again under­line the success of our invest­ment acti­vi­ties,” commen­ted Susanne Zeid­ler, CFO of DBAG, in connec­tion with the publi­ca­tion of the quar­terly finan­cial state­ments. And he conti­nues: “In both cases, we have multi­plied the capi­tal inves­ted. Our success is ther­e­fore not reflec­ted in the valua­tion result of a single quar­ter, but is only deter­mi­ned after seve­ral years, when we sell an invest­ment again.”

At the begin­ning of the current finan­cial year, the partly massive decline in the earnings multi­ples of listed peer compa­nies, which DBAG uses to value its port­fo­lio compa­nies, had a strong impact on conso­li­da­ted earnings. Follo­wing a signi­fi­cant reco­very in valua­tion multi­ples in the second and third quar­ters, this capi­tal market effect was again almost neutral as of June 30, 2019.

Earnings before taxes in the Private Equity Invest­ments segment reached 11.0 million euros after the first nine months of the finan­cial year, down 12.5 million euros on the segment result for the same period of the previous year. This was due to signi­fi­cantly lower earnings from the invest­ment busi­ness. The fund consul­ting segment perfor­med worse than plan­ned, with earnings before taxes of 1.6 million euros, compared with 4.2 million euros in the corre­spon­ding prior-year period. As expec­ted, income from manage­ment and advi­sory services for DBAG Fund VI, DBAG Fund V and DBAG ECF decli­ned. Howe­ver, there were also unplan­ned expen­ses, higher expen­ses for uncom­ple­ted tran­sac­tions and higher person­nel expen­ses due to varia­ble compen­sa­tion for DBAG employees follo­wing successful dispo­sals and new invest­ments. Conso­li­da­ted net income of 12.6 million euros resul­ted in a return on equity of 3.1 percent in the first nine months.

In view of incre­asing macroe­co­no­mic uncer­tain­ties, DBAG redu­ced its fore­cast for the current fiscal year on July 10, 2019. Assum­ing stable valua­tion condi­ti­ons on the capi­tal market, it expects conso­li­da­ted earnings for the 2018/2019 finan­cial year to be at least positive.

DBAG contin­ued to invest along­side DBAG Fund VII in the third quar­ter of 2018/2019. The MBO of IT services company Cloudf­light was the fund’s seventh invest­ment. With the fulfill­ment of the legal requi­re­ments, the invest­ment in the radio­logy group blikk was also comple­ted in the third quar­ter. This means that around 65 percent of the invest­ment commit­ments of DBAG Fund VII, which has been inves­t­ing in medium-sized compa­nies since Decem­ber 2016, are commit­ted. “That is why we remain confi­dent about the future,” affirmed CFO Susanne Zeid­ler. “With these invest­ments, we have laid the foun­da­tion for future success.”

About DBAG
Deut­sche Betei­li­gungs AG, a listed company, initia­tes closed-end private equity funds and invests along­side DBAG funds in well-posi­tio­ned medium-sized compa­nies with deve­lo­p­ment poten­tial. DBAG focu­ses on indus­trial sectors in which German SMEs are parti­cu­larly strong by inter­na­tio­nal stan­dards. With this expe­ri­ence, know-how and equity, it streng­thens the port­fo­lio compa­nies in imple­men­ting a long-term, value-enhan­cing corpo­rate stra­tegy. The entre­pre­neu­rial invest­ment approach makes DBAG a sought-after invest­ment part­ner in the German-spea­king region. The capi­tal mana­ged and advi­sed by the DBAG Group amounts to appro­xi­m­ately 1.7 billion euros.