Deutsche Beteiligungs (DBAG) released today its H1 FY18/19 results, reporting net profit at €7.6m versus €18.5m in the previous year. The results were negatively affected by €13m in negative changes in portfolio valuation due to capital market factors despite the market rebound in Q2 (which we estimate had a €34m positive impact on Q219 results). As a result, the company’s net income guidance of €29-38m remains under pressure.
DBAG states that overall conditions were less favourable for its portfolio companies in H118/19, particularly in selected sectors such as automotive and wind power. DBAG’s Private Equity Investments segment reported a profit before tax at €5.8m compared with €16.3m in H1 FY17/18. Fund Investment Services segment net income decreased to €1.8m from €2.2m in the previous year. Overall, Q2 FY18/19 contributed €29m to its half-year net result of €7.6m.
DBAG has released the FY18/19 guidance in November 2018, but it highlights that the target remains under pressure due to deteriorating market environment, as the guidance do not account for any expected change in market multiples. Due to its long investment horizon, DBAG’s defines its guidance relative to five-year average result. For FY18/19, the company expects a 20-40% lower than average income due to relatively young portfolio. However, it anticipates that it will post a net income 40% above five-year average by FY20/21.
In H1 FY18/19, DBAG added three management buyouts (MBOs) to its portfolio: FLS (a software developer), Kraft & Bauer (a provider of fire protection systems for machine tools) as well as Sero (a development and manufacturing service provider for electronic components). After the reporting date, DBAG Fund VII has agreed on the MBO transaction with Cloudflight, an IT services provider focused on digitization and cloud-based transformation. This means that DBAG Fund VII has already invested around 60% of the committed capital since its launch in 2016.
The portfolio companies were also active in terms of M&A, performing five new investments in the period, and further three after the reporting date. New companies were added to BTV Multimedia, netzkontor, Telio and duagon, as well as to Radiologie-Gruppe (the acquisition of the latter is expected to be completed soon).
The currently relatively young portfolio of DBAG suggests that the company’s activity on the disposals side will be rather limited in the nearest future. During H1 FY18/19 company sold two entities – Cleanpart (agreed FY17/18 settled during the period, at a 2.4x money multiple) and minority stake at PSS. Unser Heimatbäcker filed for insolvency and was excluded from the portfolio.
Author: Milosz Papst