Deutsche Beteiligungs AG
XETRA:DBAN
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Deutsche Beteiligungs AG
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Good morning, and this is Thomas Franke speaking from DBAG in Frankfurt. Hello to everybody. This is our call to let you know what we have achieved in the first 3 months of the new financial year. I want now to hand over to Susanne Zeidler, our CFO.
Yes. Good morning, everybody, from my side. Welcome to our conference, and I would like to start immediately with Slide #3. First quarter at a glance, we believe we had a good start in the new financial year. It started with good investment activity with 2 new small buyouts alongside DBAG ECF and at the level of our portfolio companies which needed only partially to be backed by Deutsche Beteiligungs.Net income was significantly influenced by lower valuation multiples, as it was the case in previous years in our first quarter. We reached the net income of EUR 11.4 million, and last but not least, we confirm our forecast. Some key performance indicators at Slide #4. Net income of EUR 11.4 million derived mainly from Private Equity Investment, however, Fund Investment Services was profitable again. Return on equity per share was 2.7%. In the first quarter of the previous year, net income was EUR 14.1 million. But this net income was significantly influenced by the Grohmann exit which had contributed EUR 7.1 million to net income. So if you deduct this from previous year's net income, we had a net income increase.Some information on the new investments. I go to Slide #5. In January, we published the investment in Sjølund which had been signed by the year-end. This means that it's now completed. This was second small buyout we did since we opened DBAG ECF for this type of investment and the first investment since the beginning of the FIRST NEW VINTAGE of DBAG ECF. Sjølund is one of the biggest provider on the niche market for complex-bent aluminum and steel components, and it is the first Danish company in our portfolio, however, in our core sector and with a strong customer base in Germany.The second investment we initiated or signed during the first quarter of the current financial year was Netzkontor. The first buyout in DBAG ECF and the second investment in the FIRST VINTAGE which is now about 25% of the committed capital is now invested. Netzkontor offers a range of services relating to the planning and supervision of fiber optic network construction and handles network management for operators. This investment too was completed in January. The total of -- amount of capital invested from DBAG balance sheet for these 2 new investments is about EUR 9 million.I come now to some information on what has happened at the portfolio companies level. There have been some transactions, not all of them visible in our figures. And the first thing to mention is that Cleanpart completed the sale of its healthcare business to a subsidiary of Fresenius -- of the Fresenius group. The company can now focus on services for the semiconductor industry, and the cash inflows from the sale and from a subsequent refinancing of the company are not already visible in our...[Technical Difficulty]
So I continue on Slide #7 with the second topic, Silbitz. We agreed to a partial disposal of the company, 22% of the shares were sold to a strategic buyer. This transaction was only completed in February, so it is not reflected in the figures yet, but we took into account the knowledge from this transaction in the valuation of Silbitz at the year-end date. Poly -- and the buyer of this minority stake in Silbitz already has a minority stake in the second iron foundry in our portfolio, which is Gienanth, since the last financial year. In addition, we agreed a -- Polytech agreed on a merger with an Israeli company, G&G, which is a manufacturer of innovative and lighter filling materials for implant. This merger is extremely important for the strategic development of Polytech. In this context, DBAG will be investing another EUR 900,000, and the shareholders of G&G will be taking over 20% of the Polytech share. Again, this business complementation has not been completed yet but already been taken into consideration in the valuation of Polytech at year-end. And last but not least, some portfolio companies did some add-on acquisitions, and a significant part of these add-on acquisitions has been financed by the portfolio companies themselves. They didn't need any financial backup from Deutsche Beteiligungs. This is why these transactions are not visible at our -- at -- in our financial statements, but as they are carried out in order to develop the portfolio companies in strategical terms, this will pay out in higher valuations in the coming months I believe. I go to Slide #8 and start talking about Fund Investment Services. You'll see on this slide that fee income rose significantly year-on-year. Fees from Fund V and Fund VI were lower due to the exits of the past financial year, but this effect was more than compensated for by much higher income from DBAG Fund VII. The investment period of DBAG Fund VII had started in -- on 21st December, 2016, so in the previous first quarter, there had been only few days of management fee income, whereas it was now accounted for the entire first quarter. On the other hand side, net expenses are significantly influenced by a special effect of EUR 900,000. That is why we only show a net income of -- net income from Fund Investment Services in the first quarter of EUR 700 million (sic) [ EUR 0.7 million. ]EUR 900,000 is the amount of the remuneration that we received for the work performed by the members of our investment team in the supervisory bodies of the [indiscernible] portfolio companies since the start of the investment period 10 years ago. According to the limited-partnership agreement in this fund, this remuneration would have to been offset against the fee income, and we realized it unfortunately only now and corrected it now in our figures, and this led to a special effect which will not recur in coming period.Slide #9. Private Equity Investment business, very important figure is net asset value. This increased reached now EUR 475 million, and the most significant asset is portfolio value with EUR 265 million. Financial resources is still a significant amount after the disposals of the last financial year.And to have a briefer look on the portfolio value, I would like to ask you to go to Slide #10, where we show, as usual, the portfolio value bridge, and you see that portfolio value increased by EUR 13 million. The investments shown on this slide are -- do not include the 2 new buyouts we signed during the first quarter but reflect some follow-up investments in various portfolio companies from the previous quarter, which had probably been closed during the first quarter of this financial year.As the disposal, we show here the sale of the healthcare business by Cleanpart. Important is the value contribution of EUR 12 million, mainly deriving from earnings improvement and reduction in debt at portfolio level. This is both pretty much in line with the previous year figure, but -- and this is also true for the negative change in multiples, EUR 9.3 million negative effect from a change in multiple compared with a similar effect of EUR 10.5 million in the first quarter of the previous financial year.And I would like to remind you that the first quarter of our financial year is always the reporting date at which we skipped from the valuation base on half performance figures to a valuation base on the budget of the previous year. Therefore, we have to deduct the multiples of the listed peers no longer from, in this case, 2017 actual figure but to 2018 budget, and what we observed in our first quarter at each quarter-end date in the past years is that, obviously, the market capitalization of the listed peers does not take into account fully the earnings improvement of the peer companies, which leads, in most of the cases, to reduced or lower multiples, and this influences the valuation of our portfolio companies, and it was the case during the past 3 financial date -- years at this reporting date.I would like to -- for the reason of completeness, we give you on the next 3 slides, some further information on the composition of portfolio value or the portfolio in total, sector dissemination, value split, et cetera. There are not such significant changes compared with the previous quarter, therefore, I would like to skip these 3 slides and go directly to Slide #14 to talk a bit about the net result of investment activity, but this is mainly influenced by the value increase of the portfolio. So this is summarized on the top of the slide, but again, I would like to mention that if you compare what has been achieved in the first quarter of this financial year with what had been achieved in the year before, please take into account that in the previous year, net result of investment activity was positively influenced by EUR 8.7 million by the Grohmann exit and net income was still influenced by this exit by EUR 7.1 million. So if you deduct this, on a comparable basis, we show a higher value increase compared with the previous year. Slide #16 gives you some information on what is taken into account as carried interest. In the first -- in the valuations on 31st December, 2017. And now it starts again being noisy in the background.[Technical Difficulty]
It sounds very noisy, but I try to continue. Again, Slide #15 as in here for sake of completeness, in order to give you the information, we account for carried interest in the valuation of the co-investment vehicles for DBAG Fund V and for DBAG ECF, because they are the preconditions for carry payments are matched, the hotter rate is reached. This is not the case yet for DBAG Fund VI, but for sake of completeness, we give you the information that on a theoretical basis. The theoretical carried interest embedded in DBAG Fund VI -- in DBAG's co-investment vehicle of this fund amount to EUR 9.6 million at 31st December.I would like to skip the cash flow slide, because it's not so interesting, because there are only small figures, not so important. But what is the extremely more important is the outlook, and as we confirm our forecast for financial year 2017 and 2018 based on our forecast, 3 plus 9. The portfolio companies have developed in line with the -- with our expectations, therefore, we can confirm the guidance for the entire financial year.In short, to summarize, we see a number of positive factors, for example, the performance of the economy, but there are also a number of factors that could have a negative impact, and I would like to mention only a few of them. For example, a short supply of labor, as we have full employment in Germany, exchange fluctuations, significant wage increases, we will see what finished negotiations of the [indiscernible] will bring to the economy.And to finalize, it's not necessary, I think, to mention that due to the nature of our business, quarterly results may fluctuate significantly and that we would like to be -- that the performance to look -- that it is necessary to look our performance on the level of more 1 year or even 10 years instead of a quarter only, because there might be some influences from the capital market which do not stand for what we achieved in -- with our hard work with the portfolio companies. With this, I would like to thank you for the attention.
I think this to be end of the conference.
Thank you very much.