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IDENTIFYING OPPORTUNITIES.
DRIVING DEVELOPMENTS.

Creating value through
diligence and foresight

ANNUAL REPORT 2018/2019

Key Figures

NET INCOME
45.9
€MN
RETURN
ON EQUITY
PER SHARE
9.1
PER CENT
PERFORMANCE
FOR SHAREHOLDERS
2.0
PER CENT
NET ASSET
VALUE
472.1
€MN
NET INCOME
FROM FUND
INVESTMENT SERVICES
3.0
€MN

TO OUR SHAREHOLDERS

Identifying opportunities. Driving developments.

In 2018/2019 we followed this motto with particular fervour and in this letter we would like to explain to you why...

Investment strategy: Our core sectors

A corporate history comprising more than five decades – this represents more than 300 private equity investments in German mid-sized enterprises for Deutsche Beteiligungs AG. A large number of these transactions concerned the four sectors in which the German economy demonstrates particular strength: mechanical and plant engineering, automotive suppliers, industrial services and industrial components. It therefore goes without saying that these are our core sectors. With our extensive knowledge and a deeply-rooted network in our core sectors, we comprehensively support our portfolio companies with capital for financing growth – but especially with our long-standing experience in the successful implementation of change processes.

Investment strategy: Our new focus sectors

Current changes in the established economies are opening up opportunities for us to support business models outside our four core sectors. We are seizing these opportunities, concentrating on fast-growing enterprises that are often still young but which have already established themselves in their respective markets. We have invested in a total of 33 enterprises since 2013. Three new focus sectors have emerged from our activities: broadband/telecommunications, IT services/software and healthcare. There is a sufficient number of enterprises in these sectors that suit our approach and match our business model in terms of size, maturity and developmental potential.

BUSINESS SEGMENT FUND INVESTMENT SERVICES

The advisory services provided to the DBAG funds by Deutsche Beteiligungs AG’s investment team are bundled in the Fund Investment Services business segment. DBAG is paid a volume-based fee for these services, so that projections can be made rather easily. The earnings base is reduced by disposals during a fund’s disinvestment phase; it grows when a new fund is initiated and capital can be successfully raised. DBAG receives additional one-off fees based on individual transactions for providing advice to DBAG ECF.

258

INVESTMENT OPPORTUNITIES
WERE ASSESSED BY THE
DBAG INVESTMENT TEAM FOR
THE DBAG FUNDS IN THE
FINANCIAL YEAR 2018/2019

The members of the investment team are the key to success in the Fund Investment Services business: they prepare investment decisions, support portfolio companies and advise the funds on the sale of investments.

21
MEMBERS

make up the investment team, including two members of the Board of Management who are directly involved in the transaction business.

9
YEARS

is the average length of service of investment team members at DBAG.

246
YEARS

of experience have the investment team members combined in the private equity business.

BUSINESS SEGMENT PRIVATE EQUITY INVESTMENTS

The Private Equity Investments business line comprises the investments in mid-market companies undertaken by Deutsche Beteiligungs AG alongside the DBAG funds. Following an extension to DBAG's strategy, investments that are financed solely from DBAG’s balance sheet will also be included. This Principal Investments business line will dominate DBAG’s enterprise value. Net gain or loss from investment activity maps the change in the net asset value and is the key factor influencing DBAG’s net income; it is determined by the development of the portfolio and proceeds from the disposal of investments.

409

MILLION EUROS
IS THE VALUE OF OUR
PORTFOLIO AS OF THE 
REPORTING DATE. THIS
EQUALS TO 1.4 TIMES
THE ACQUISITION COSTS.

78.4
€MN

DBAG invested in its portfolio.

54.3
€MN

was the fair falue of the disposals from the portfolio.

49.3
€MN

amounted the increase in the value of the carried portfolio.

OUR PORTFOLIO

Invest

Throughout the 2018/2019 financial year, our investment team once again screened more than 250 investment opportunities, selecting four which are particularly promising. Two of these transactions became effective during the financial year, the two remaining ones after the reporting date. Specifically, we were able to structure two MBOs in our core sectors of automotive suppliers and industrial components, plus two additional MBOs in our new focus sectors: broadband telecommunications and IT services/software.

Develop

A number of portfolio companies were compromised in their development during 2018/2019 given abaiting economic momentum. Despite an economic environment which was challenging at times, the portfolio companies refined their strategic repositioning – through acquisitions, for example. Seven portfolio companies were thus able to further expand their geographical footprint, supplement their product range, or actively pursue consolidation in their sector. While these activities are the foundation for value appreciation for these companies, they also ensure that the companies are well-positioned beyond the duration of our investment. Portfolio companies executed a total of eleven acquisitions, of which six were financed using said companies' own funds. The remaining five transactions were facilitated by equity contributions by the funds, as well as DBAG:

Realise

DBAG and the DBAG funds are partners for a certain period of time. Once change processes have been completed and their positive impact has become visible, we will sell the investment. We structured four exits during the 2018/2019 financial year, and closed one exit agreed upon in the previous year (Cleanpart). We held the companies in our portfolio for between four and seven years; one initial investment (novopress) had been entered into as early as 1990. The sale of our shareholding in inexio was only closed after the reporting date. Another investment ended after the company in question had to file for insolvency (Unser Heimatbäcker):

inexo

For DBAG, inexio has been a prime example of a successful private equity in-vestment, where we support a talented management team, promoting a very promising business model.

Back in 2013, when we acquired a minority stake in the previously family-owned business during the course of a capital increase, providing additional profit-participation capital, broadband communications was still the domain of pioneers – covering a segment with strong growth potential. We supported inexio closely over the following six years. Especially in such a fast-growing business, the management team keeps facing new challenges: with an experienced partner at their side, they can tackle such situations in a more targeted manner, and with less risks involved.

Nowadays inexio is one of the fast-growing, leading independent providers of fibre-optic connections in Germany. Together with its private equity investors, the company has established a fibre-optic network in rural and suburban areas across Southern Germany, thus significantly contributing to the build-up of local infrastructure there – allowing businesses to stay in their home region, creating local jobs.

THE DBAG SHARE

Dividend policy will be maintained: We are again proposing a dividend increase for 2018/2019

Shareholder participation in DBAG's success is one of our three financial objectives. In the summer of 2016, we set out our dividend policy, and this still applies. Over the past four years, through dividends alone, we have been able to provide our shareholders with an annual return of at least three per cent, and on several occasions more than four per cent. Added to this is the positive share price development. We will also propose to the Annual General Meeting that the dividend for the past financial year be increased to 1.50 euros per share. On the basis of this proposal, the total dividend payout will amount to 22.6 million euros.

1.50
EUROS

dividend proposal

3.4
PER CENT

increase compared to previous financial year.

4.4
PER CENT

dividend yield

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CONTACT

Thomas Franke
Thomas Franke

Senior Vice President, Head of Public Relations and Investor Relations

Thomas Franke
Name:
Thomas Franke
Telephone:
+49 69 95787-307
E-Mail:

Thomas Franke

Senior Vice President, Head of Public Relations and Investor Relations

Thomas Franke joined DBAG in 2001.

Previously he was Head of Internal Communications and Public Relations at Lurgi AG. Thomas Franke began his career as a business journalist at Frankfurter Allgemeine Zeitung.

He holds a degree in Economics from the University of Hamburg. Prior to his university education, he completed an apprenticeship as a television and radio journalist.

Thomas Franke

Senior Vice President, Head of Public Relations and Investor Relations

+49 69 95787-307
thomas.franke(at)dbag.de