Deutsche Beteiligungs AG (DBAN) Earnings Call Transcript & Summary

Yes. Hello, and a warm welcome on our side. Jumping straight into what was already an active start to the year. Obviously, there's a lot of volatility out there, and we'll come to that later. But despite all the fog and mist, we were able to sell Kraft & Bauer, a company which we have accompanied for 7 years. The company has transitioned from being mainly a supplier to the automotive industry to become mainly a supplier to the medtech company. And one thing leads to another. Mr. Bauer from Kraft & Bauer was one of the very close friends over time from Markus Hipp of Hipp Technology. And so he introduced us to Markus Hipp, and that led to a very nice investment in the medtech space. We feel very comfortable. The investment is off to a flying start, and this just shows how it pays off to be a good citizen to have a good reputation and to have a long-standing brand. Because here, there were more than 50 private equity companies trying to get into submitting even a bid for Hipp, but we were able to close it on a very -- on a basis of mutual trust with Hipp by not paying the highest price even there. So very, very pleasant development there. Overall, over the last 8 months, it has been really, really active with 7 transactions. There are 4 acquisitions and 3 exits. And I must say, together with Hipp and Mait, we deployed more than EUR 500 million of enterprise value in bilateral transactions that is really a testimonial in times of high volatility that people trust to go bilateral with us, and it's also testimonial how strong our brand resonates in the market, which is proving quite difficult. We are also very happy that some of our larger disposals next to Kraft & Bauer, signing and closing took place on the same date. Our transaction with duagon has closed in the beginning of January. And thus, we are now in a very comfortable liquidity position and are able to take advantage of the volatility we're going to see. We have confirmed our guidance despite what I would call quite a weak quarter, but it's early days and mainly the quarter was impacted by the volatility we've seen on the stock market and especially for us, given the way we mark our companies, the 13th of March was obviously a less than ideal cutoff date. So all in all, we restate our guidance. We have been able to sell one company and hopefully more to come along the way. Coming to key highlights. Nothing special to report there. NAV mainly stable. Fund Investment Service, we have been able to come in nearly where we want to be. It's impacted by -- temporary by placement agent fee cost for the Continuation Fund of Solvares. But otherwise, the Continuation Fund of Solvares also helps us to keep the Fund Investment Service profitability high despite a delayed Fund IX, which we deemed on the back of some more exits to come. There could be a chance that we would start going in the market later this year with Fund IX. Group income is negative EUR 20 million or minus EUR 1 per share. As I said, that's mostly driven by the fluctuations in peer group. Coming over next slide, you see that with Mait being closed and Solvares Continuation Fund doubling up, our IT software and service base has grown to 30%, that's obviously raising these days some questions. Rest assured, we have been sort of going through our portfolio, and we see very substantial growth. And as of now, so speaking of April numbers, that's the latest figures I have for my portfolio companies. Mait, Akquinet, Solvares and Freiheit who are in that bracket, all trade comfortably above their budgets. So it obviously depends also on the multiple you get, but we see that AI for our companies right now is more a driver of growth than a destroyer of wealth. Otherwise, you see that our concentration in the top 5 is quite high with 37%, but we have higher than CPL marked for exit. Itelyum is obviously profiting also from the significant increase in oil prices given that they are in the business of upgrading used cooking oil. So it's no wonder it's showing up as a top 5 portfolio company. Otherwise, we continue to run a very diversified portfolio. Kraft & Bauer, as I said, a very nice transaction. This was marked at around 1.2x 12 months ago. We were able to get roughly 2x depending also on a small earn-out, which we will get -- hopefully get by the end of the year. So there might be some -- a bit more upside depending on how Kraft & Bauer continues to trade. It was also -- what was very nice is that we were able to do that together with the Grohe family. This has helped us to establish links to what is viewed as a very entrepreneurial family. And we are also looking at one smaller acquisition together, given that there's a mutual trust between the 2 organizations. Moving over to Hipp. As I said, we have been able to preempt the process. We bought out the secondary transaction, but we bought out basically a family office who entered Hipp some years ago when he -- Markus Hipp was in need of some more money for his capacity expansion. These were mainly individual family investors from Switzerland. And given that they did a good deal and they were not willing to significantly invest going forward, but wanted to derisk more of their investment. We stepped in after we have been introduced by Klaus Bauer, as I said, and we're able to preempt a structured sales process where the bank, which was mandated got inquiries of more than 50 interested parties just to give you -- show you how crowded the field can be. Otherwise, the investment is off to a flying start, trading very strongly, and I hope that we will be able to keep up the good news going forward. It's worth noting that it's not only in the medical space, but also 15% to 20% is defense and robotics, which are also 2 very nice growth sectors. And depending on the path going forward, this gives us optionality for this investment. NAV per share, nothing special there. Our net income -- negative net income was a bit helped by our continued buyback -- mitigated by our continued buyback. Nevertheless, it's obviously not what we strive to be. We have extended our buyback program so as to make sure that we fully deploy the money we said we would deploy. And it goes without saying that with a persistent high discount to NAV, this is one of the more attractive ways to invest money, but also to reward our shareholders. On the next slide, you see that our portfolio has come down a bit, mainly because of disposals and then also the change in value has driven that a bit lower. The disposals are obviously reflected on the other side by the cash income. On Page 11, you see that pretty much 90% -- 99% of our income is due to multiple and valuation changes as we've seen -- as I said before, on the page with our sector exposure with now 30% -- nearly 30% in IT software and services. Obviously, with [indiscernible] being out there, there was -- this was obviously not very helpful given how this traded in the first quarter. Nevertheless, we've seen quite a nice jump back since late March, which was cutoff date. It was -- maybe it's also worth mentioning here a few words on private credit. We roughly have EUR 75 million invested in private credit, which is performing very, very nicely. No software exposure there, very persistent growth in the underlying portfolio companies and our lines of credit have also been significantly derisked since the start of the year. So we think that we will get redeemed on par with every single investment, and then these will be very, very nice investments, I must say. I'm pretty happy about that. Coming over to Fund Investment Services. As I said, we would have been able to pretty much hold our earnings base, save for the placement agent fees was about Continuation Fund. This is quite an achievement given that probably Fund IX is running now 2 years late from what we had expected 2 years ago. On Page 13, you see our increased financial capabilities. Obviously, velocity helps. And so we are also -- this will come down a bit with the dividend going forward, continued share buyback and also the deployment of Hipp. Nevertheless, we still have very strong capital base. We plan some exits and I try to keep the velocity which we have increased in our portfolio, I try to keep that high so as to turn out also consequentially companies which are no longer compounding in a positive way, free up capital and deploy it into much more interesting companies like, for example, Hipp. On the next slide, nothing exciting there. We continue to reiterate our guidance and outlook despite obviously, what I would still say as a miss in the first quarter -- or first quarter coming in below our expectations. We feel comfortable with our guidance as of now. That would conclude my conference call. As I said, quite a weak quarter, mainly, I don't want to use the stock market as an excuse, but I think it's fair to say that here, 99% of our earnings, which is driven by the cutoff date, which was less than ideal for this quarter. We reiterate our guidance, and we work quite diligently to keep the investment and also divestment activity quite high to rotate our portfolio consequentially to where also growth will happen in Germany even in such a subdued environment there. Thanks, and goodbye.