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26.01.2012

Deutsche Beteiligungs AG: Stock market trend weighs on results

  • Negative net income of 16.6 million euros due to downbeat stock market sentiment
  • Dividend of 0.80 euros per share following profitable realisations
  • Liquidity remains strong
  • Good start to new financial year: two MBOs agreed

Frankfurt am Main, 26 January 2012. Deutsche Beteiligungs AG (DBAG) completed its 2010/2011 financial year posting negative net income of 16.6 million euros. Net asset value (NAV) per share fell to 17.47 euros. The prime reason for the loss was a negative net result of valuation totalling 20.6 million euros, which largely derives from a downward value movement for a quoted portfolio investment, Homag Group AG. The company is valued at the closing rate of its shares on the reporting date. The share price fell from 15.48 euros to 8.48 euros over DBAG’s 2010/2011 financial year, resulting in a negative valuation effect of 18.5 million euros on income. Deutsche Beteiligungs AG also uses parameters that derive from the stock market for the valuation of its unquoted investments. The sharp drop in stock market levels beginning in August 2011 therefore also had a negative impact on the valuation of the other companies in the portfolio – despite their solid operating performance.

DBAG’s liquidity was not compromised by the loss. At the reporting date on 31 October 2011, Deutsche Beteiligungs AG had cash and securities of 155.6 million euros, an increase of some 15 million euros over the preceding year. The rise stems, among other things, from proceeds from the realisation of Heim & Haus Holding GmbH and the (partial) divestment of Preh GmbH in May and June. In view of both of these successful transactions, at the upcoming Annual Meeting the Supervisory Board and the Board of Management will recommend the payment of a surplus dividend of 0.40 euros per share, in addition to an unchanged base dividend of 0.40 euros per share, or a total dividend of 0.80 euros per share.

DBAG had completed the preceding 2009/2010 financial year posting net income of 34.1 million euros and net asset value per share of 20.03 euros. Of that amount, the Company paid a dividend of 1.40 euros per share in March 2011. The 2010/2011 loss reduces net asset value by a further 1.16 euros per share, or 6.2 percent. For the last ten-year period (2001/2002 to 2010/2011), the return on NAV has averaged 11.2 percent. 

Key indicators 2010//20112009/2010
Net income for the year€-16.6mn€34.1mn
Return on NAV per share-6.2 %12.7 %
NAV per share (at 31 October)€17.47€20.03
Distribution (2010/2011: recommended)  
Dividend€0.40€0.40
Surplus dividend€0.40€1.00


“2010/2011 was a two-sided year,” said Wilken von Hodenberg, Spokesman of the Board of Management of Deutsche Beteiligungs AG at the company’s annual press conference today. “We generated a profit of some 20 million euros in the first two quarters – an achievement that was more than offset by the adverse sentiment on the stock markets that made itself felt beginning in August.”

High dividend yield

Von Hodenberg emphasised that the year’s negative net income stems solely from valuation effects, not from realised losses: “Both of the realisations this past financial year clearly show that negative valuation changes in the course of a year are an unsuitable basis on which to draw conclusions about the success of an individual investment.” The investments in Preh and Heim & Haus were at times valued significantly below their historical cost. In 2011, both divestments achieved proceeds that exceeded historical costs by far and met targeted returns. “These sales proceeds put us in a position to again recommend paying a surplus dividend, enabling our shareholders to benefit once more from a high dividend yield,” said von Hodenberg at the press conference. Relative to the shares’ current quotation, this equates to a dividend yield of more than five percent, and 4.3 percent relative to opening net asset value per share at the start of the financial year.

Despite the negative net income, DBAG does not see its 2010/2011 financial year as a failure. Von Hodenberg: “We consistently adhered to our strategy and invested in line with our investment criteria – in the Romaco group during the past financial year, and in Spheros and Brötje shortly after the year ended. Most portfolio companies made good progress and completed the year posting higher revenues and earnings. Finally, we held a closing for a new co-investment fund, which expands the financial base for new investments in German ‘Mittelstand’ companies.”

Key companies in the portfolio of Deutsche Beteiligungs AG
CompanyIndustry
Clyde-Bergemann-GroupMechanical engineering and plant construction
Coperion GmbH Mechanical engineering and plant construction
Coveright GmbH Specialty chemicals
FDG S.A. Industrial services
Grohmann GmbH Mechanical engineering and plant construction
Homag Group AG Mechanical engineering and plant construction
ICTS Europe Holdings B.V. Industrial services
Preh GmbH Automotive suppliers
Romaco-Group Mechanical engineering and plant construction

Good start to new financial year

“With the two MBOs we structured, the new financial year was off to a good start for us,” von Hodenberg said. “We hope to add further attractive investments to the portfolio in the months to come.” Deutsche Beteiligungs AG has ample assets of approximately 400 million euros at its discretion for these purposes: more than 120 million euros from its own balance sheet (after funding its most recent acquisitions and the proposed dividend payment) plus commitments to its co-investment funds, the DBAG Expansion Capital Fund for expansion financings and DBAG Fund V for management buyouts.

 

Given a stable economic environment, DBAG expects value growth for its existing investments in the current financial year, with positive valuation contributions coming from the portfolio. The Company, however, also emphasised that its portfolio companies are not immune to cyclical influences. Whether and to what extent value growth will actually be possible this financial year remains uncertain in view of the unstable economic environment. DBAG therefore does not see itself in a position to forecast results for the 2011/2012 financial year.