Deutsche Beteiligungs AG (DBAN) Earnings Call Transcript & Summary

Well, good morning, everyone. I'm Roland Rapelius, head of IR at Deutsche Beteiligungs AG, and it's my pleasure to welcome you to this H1 call. With me is the Spokesman of the Board of Management, Tom Alzin. And without much ado, I would like to hand over now to you, Tom. Please go ahead.

Yes. Very warm welcome on my side. Actually, I'm not seeing the slides, Francisca.

You're on the Page #3 now.

Yes. So we had a very successful -- we announced -- just after the quarter ended, we announced some very successful exits. The exit of in-tech being a very strong one, we actually achieved 3.2x our initial investment in less than 2 years. So a very nice accident, also a very nice [ ARR ] and a very nice ticket. Same for Solvares, where we only sold a minority because we want to keep on participating on the upside we still see with this company. So all in all, very pleasant development at our company. We reported a 6% NAV growth during the first half of the year. This NAV growth has been adjusted, and Roland will come to that by a change in valuation framework. This is something we did out of a position of strength, which this quarter cost us some money, but we think that over the course of the next months, this will -- and years, this should we be worth -- should we be able to continue to successfully develop our portfolio companies. Coming over to the fund service business, no surprise there. We are pretty much in line with 7.1x -- EUR 7.1 million EBITA, very much in line and no surprise there. We explicitly confirming our forecast from here on. Yes. On the next slide, you see our net asset value. It has increased a bit because we included the shares we bought back during the quarter, although the number are still not very meaningful. But we are right now in the market buying our shares at what we deem very attractive valuations. After the hit we took of the change of our valuation framework, we still were able to show EUR 19.2 million of earnings before taxes. The cash flow from the investment activity does not yet include our successful disposals. We expect the cash to come in over the next 2 quarters following the closing of these transactions. Regarding the sale of in-tech, given that it was sold to a strategic foreign investor, this -- we expect a bit more than usual regulatory requirements for the closing, but the transaction will close. But obviously, the timing of the cash inflows is a bit somewhat delayed into the future, but we are being paid for that. No big change on the fund investment service detail nor on the assets under management. This will, of course, change once we are in the market with new funds, and these funds tend to close. All in all, this leads to a group net income of EUR 24.6 million for the first half of the year. Going to the next slide. There, you see our investment activity. With that, we are by far the most active player in the German private equity space, and not only by doing acquisitions but also by really being able to sell a lot of companies at very attractive prices to strategic players in the space of Solvares to other private equity funds. We did 2 more add-on acquisitions during this quarter. 2 -- 3, actually. 2 for AOE, our new IT company and 1 add-on acquisition for Avrio Energie, our biogas platform. On the next slide, you see that our portfolio is on track to become a very, very granular portfolio. In fact, if you look at the top 1 to 5 with 31%, you see that Solvares and in-tech are in that. This will go out as of next quarter when the transactions close and the portfolio will become even more granular from here on. I think that's something where we really did a great, great job over the last year, bringing portfolio concentration down. Having no outsized bet or trunk risk in our balance sheet, we are there on track. As I said already before on the other quarters, in terms of allocations, we are very happy to have been able to grow our growth sectors all in all, but we want to keep a diverse portfolio split. And the split, you see at the 31st of March is pretty much a split where we feel very comfortable and which should be also reflective of the sector split going forward from here on, yes. In the next slide, you see that we have been able to increase our lead, although, again, I'm emphasizing that market share is a silly indicator here. But where I really want to show to draw your point of attention is that if you look at on the right top side, DBAG MBOs by vendor type over the last 5 years, we bought a staggering 92% out of family and founders, mostly on bilateral situations where we had exclusive access to. That is a number which is far better than the market, and it's also a number which is unmatched by any competition out there. And that's why our high pace of investment activity despite being on bilateral situation shows that our platform is really working, and we are very, very happy with the current setup. Obviously, also, it's early days, but our deal flow also on the credit side helps to add to our platform here. With that, I would hand over to Roland, who will give you some granularities on the number on the balance sheet and P&L.

Yes. Thank you, Tom. On the next slide, you see the NAV development in the first 6 months, 6% value increase. As always, we paid out a dividend, EUR 1 per share, minus EUR 18.8 million and the change in accounting estimates. That is something we have -- like Tom has said before, we have decided to implement this year. The rationale is to reflect the less volatile development of private markets compared to public markets. And in that way, aligning ourselves with best-in-class private equity standards. So going forward, you should expect -- or we expect and you should expect lower volatility of our valuation. And that had an impact of minus EUR 19 million in the first 6 months. All in all, reported NAV came to EUR 673.1 million. The portfolio value was mainly driven by the change in value. Additions and disposals were almost matched in the first 6 months. Additions, mainly NOKERA and ProMik, as Tom has pointed out, as well as some planned investments in our existing portfolio companies as always. And disposals here, first and foremost, R+S but also GMM Pfaudler played a significant role here. Change in value, the EUR 30.9 million, we come to in detail on the next slide. Here, you see again the EUR 30.9 million and the waterfall towards that. Change in earnings, these are mainly the budgets, the introduction of the budgets of 2024. And by sector, the contributors came mainly from IT services and software, from industrial technologies but also from our others segment. Change in debt. As you know, we typically do not take dividends, but our portfolio companies use the cash also to pay down their debt, and that led to an average minus -- or in total, we're minus EUR 10.2 million contribution. So overall, the operating performance was slightly positive in the first half year. And then change in multiples, clearly, the major contributor here. And in that change in multiples column of EUR 33.2 million were also the 2 successful exits, which had a significant contribution to that. And miscellaneous as always, it's a minor part. These are exchange rate fluctuations and other minor effects. So all in all, EUR 30.9 million net gains and losses on measurement. And on the next slide, we're already coming to the Fund Investment Services segment. As Tom has pointed out, a relatively stable development here in terms of top line, slight increase as expected. And in terms of bottom line, going from EUR 7.3 million to EUR 7.1 million EBITA. So slight decrease. And the EBT, that was impacted by the expected amortization resulting from the consolidation of ELF Capital Group. So we're also showing that in the report. So that has been EUR 5.6 million. So all in all, our forecast remains unchanged, EUR 9 million to EUR 13 million EBT for the full year as expected. The liquidity is pretty much driven by the cash flow from financing activities. And second point to make here is that the 2 exits are not -- Solvares and in-tech are not yet included in the liquidity position as of March 31. Balance sheet remains very solid with 83% equity ratio. Coming to the financial base. Here, you see our co-investment commitment alongside DBAG funds, and that's including the co-investment commitments with respect to the ELF Capital Funds. So that's going up. And once again, in the available liquidity of EUR 119.1 million, which is driven by our cash position and our undrawn credit lines, within that column, the exit proceeds of the 2 companies are not yet included. So coming back to our forecast, giving back to you or handing back to you, Tom.

Yes. Thank you very much, Roland. I'm explicitly reiterating our forecast. We feel very, very comfortable to be probably also at the middle of the range of our forecast regarding our net asset value and also EBT Fund Services. In the EBT Fund Services side, if you take our EBITA and double it, we are pretty much there already. And also from the net asset value, once you adjust that for the hit we took due to the change of our valuation framework, we should also be very, very fine here. That leaves us our conference call.

I would like to thank you very much for attending the conference call today of Deutsche Beteiligungs AG for the first half year figures. And I wish you a very good remaining week. And look, we are looking forward to speaking to you again at latest at the coming quarterly results. Thank you and goodbye.