Deutsche Beteiligungs AG
XETRA:DBAN
Earnings Call Analysis
Q1-2024 Analysis
Deutsche Beteiligungs AG
In the face of a market that has seen continuous decline since 2022, the company has maintained a strong position by being the most active player in the German market, as acknowledged by a respected finance magazine. Their strategy of selectively investing at stringent purchase prices has led them to make investments that they are confident will be fruitful over the long term. This proactive approach to market volatility is exemplified by their recent transactions which include closing investments in NOKERA and ProMik, as well as significant acquisitions such as in metal works, which they view as a transformative asset to their jewelry sector investments.
Financial health appears stable despite a slight, 1% year-on-year change with earnings before tax laying at a small deficit of EUR 8 million. The company's cash flow from investment activities was negative, impacted by investments and the acquisition of ELF. Despite these outlays, a positive note is observed in the company's liquidity and financial position—remaining unchanged with a healthy net asset value and credit lines that afford them continued flexibility for future undertakings.
The portfolio companies provide a bright spot with new budgets and full order books displayed through their robust operations and minor debt reduction. Unfortunately, not all positives were enough to offset the multiple developments by the year-end, and the net gain/loss showed a shortfall of EUR 9.4 million. Nonetheless, this perceived setback is countered by a forecast that remains unchanged, with expectations to be on track for forthcoming targets.
The tone of the management is resolute with a reiterated guidance that signals confidence in the forthcoming quarters. The company has made several strategic add-on acquisitions, like the ones on akquinet and AOE platforms, reinforcing their belief in a strong investment pipeline. Their goal of achieving a 2.5-times average on transactions aligns with their historical performance, setting the stage for anticipated capital appreciation and a solid foundation for share repurchases.
In summary, the company's executives, Tom and Melanie, stress an 'uneventful quarter,' yet uphold a tone of confidence. They reiterate the forward-looking guidance and emphasize their readiness for the future, with the vigor to capitalize on acquisition and disposal opportunities as they arise. The reconfirmation of their forecast after an earnings-light quarter suggests they anticipate stronger performance in the near future.
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Good morning, everyone. Pleasant day to have you all here. My name is Youssef Zauaghi, overseeing External Comms at Deutsche Beteiligungs AG, and more than happy to kick off our quarterly analyst call.
In the interest of time, I'd like to hand over to Tom Alzin, the spokesman of the Board of Deutsche Beteiligungs AG.
Yes. Thank you, Youssef, and a warm welcome also on my side. I would also like to introduce you and welcome for the first time, but she's been working for 1 year now with us, Melanie Wiese, our CFO, and she will guide you through a more detailed picture and the granularity of the numbers below our conference call.
Jumping into the first slide. We have been highly active in terms of reviewing deals. But obviously, we have not yet materialized on the sell or buy side something or we just closed some transactions, I'll come to that later. All in all, the NAV has been barely unchanged. I would not interpret too much into this 1 quarter of earnings here. I would say this could be a very typical quarter result, notwithstanding our forecast or even our midterm guidance. So we feel very comfortable on where we see that. That's why we've reiterated our forecast and view this as a rather uneventful, although not the most pleasant quarter here.
Obviously, earnings from Fund Investment Services have been stable and in the range we provided you.
Going -- jumping to the next slide. With NAV barely unchanged, we're still sitting around [indiscernible] per share. The share is still trading significantly below that. Hence, also, one of the reasons why we changed our dividend policy, and guided and reiterated our guidance also in the press statement that we are actively looking at share buybacks somewhere down the road, yes.
Earnings before tax, slightly negative with EUR 8 million. But all in all, that's a 1% change. And the cash flow from investment activity has also been negative given that some investment and also our investment in ELF just closed this quarter, yes.
Fund Investment Services, as I said before, EUR 2.5 million, and that leads to a group income of minus EUR 5.9 million.
Jumping to the next slide. Again, you know this chart from prior quarterly calls. Our market is still quite intact, although there has been a significant drop in 2022 that has continued in 2023. Probably, nevertheless, we have been very active. And also we have been rewarded by that because we just got the title from a renowned German finance magazine that we have been the most active player in the German market over the last year.
There's the old saying that when blood in the -- when there's blood in the streets, there's also opportunity. And we think we see some opportunities in bilateral situations, being very stringent on our purchase prices, but we did some investments where we feel very comfortable over the long term and their development. So for us, our investment opportunities have been quite -- reviewed opportunities have been quite stable.
Jumping over to the next slide. Our investment in NOKERA closed. Our investment in ProMik closed. The transaction in Pfaudler has closed in the quarter, and also our first full long-term investment in R+S has closed during the transaction -- during this quarter.
We did one add-on on akquinet, one of our IT platforms. We did 2 add-ons with AOE. And we're very happy also to do already a first add-on for Avrio Energie. Please bear in mind that AOE and Avrio Energie have only closed 2 quarters before, so that's a very active start to these 2 investments already, and we're seeing a nice pipeline in both.
Obviously, on metal works, our game-changing acquisition for this investment closed during the quarter, and we're very, very happy with that because that actually we try to prime customer to our jewelry base here.
Jumping to the next slide. Nothing eventful there. Given that no new investment has been done, it remains pretty much the same. We have continued to remain very diversified in terms of sectors, and we're not going to change that. And as I said before, relative to where we have been historically, our book is still devalued at the very early phase of where the appreciation came from.
We are looking to do 2.5, hopefully, more on average on our transactions. And I think that's also what has been achieved historically on our long-term track record. And so with the book, which is valued roughly at still costs, we have a portfolio which would bode very, very well for capital appreciation as of now. That's why we feel very good about our NAV and also our share repurchases.
Here, as I alluded before, you see that we have an award, which is a bit of a silly metric in our market space. But nevertheless, we are proud of because more and more, and that's what's playing in our cards, brands becoming a differentiator. The times where 5 seasoned investment bankers could start a private equity fund and be successful and quickly grow, in my opinion, over.
We are more and more viewing a consolidation in the alternative asset space. And as you've seen before, with ELF transaction, we decided to be an active consolidator also in that space and looking forward to the development of our company. Hence, brand image is becoming more and more important than becoming a differentiator.
We see that in the market. We see that especially in difficult markets like these markets, be it trust on seller side, be it trust on bank side. And so it's a market which, obviously, is difficult from a capital appreciation point, but it's a very good market to see new investments.
And you see as before, you know that quite well, some 60% of our MBOs are still from families and founders. And I think that share of wallet is going to increase further down the both.
With that, I would hand over to Melanie, who will give you some granularity on our numbers. Melanie?
Yes. Thank you, Tom. Yes, thank you. A warm welcome also from my side. Yes, actually nice to meet you here in that call first time. And as Tom already mentioned, the net asset value overall is really unchanged in the total numbers, as you can see on the graphic. But it's also very important to state that the forecast remains unchanged, and we believe that we are on a good track to achieve that.
And if we look into the details, then we can see that we did a lot. And maybe one page further, please. There, you can see, we started with EUR 631.9 million end of last quarter. We have the additions Tom already mentioned, with NOKERA, ProMik, but also the disposals, very nice disposal. Actually, I like that as a CFO to get the money also in, and really driven by R+S and Pfaudler.
And if you come now to the valuation and the details there, I would really hand over -- or jump over to the next page. As we can see what is really great for us, we have a very, very good positive change in earnings. That means we received new budgets from our portfolio companies. They have full order books. They are up and running. We reduced overall the debt slightly, which is a positive operating performance, offset by the multiple development to year-end, which was not fully compensated at all. As you can see, that's the net gain loss on the right side was minus EUR 9.4 million.
Overall, a very stable environment. And for me, it's really important that the portfolio companies are really up and running, the full order books and performance in the overall operations.
So if we now go to the next page, we come to our Fund Investment Service. And as you can see, we have forecasted a very stable earnings compared to last year with EUR 11.5 million and earnings result in EUR 2.5 million. For sure, as you have noticed, we acquired ELF. We had some lead costs there. It's a little bit lower than last year.
We are also in preparation of [indiscernible] implementation and so on. And cyber is also a typical cover -- topic that we really spend and take care, that everything is on track and up and running.
And if you look in our employee overview in the details, you will find 15 people more than the year before. And for sure, this has an impact also on expenses. So overall, stable as expected and as planned, I would summarize the slide.
So let me come to the next page, and I think that's also very important on liquidity. End of September, we started with EUR 20 million. The cash flow from operating activities is slightly negative as we have the typical bonus payment in December as usual. And now you can see from the investment and proceeds that we have an outflow for sure with ELF closing and payment. And then we also took something from the credit line to be prepared for January, and all this is good.
We still have free capacity and headroom in the group's investment entities, and we still have the unchanged credit lines available. So all and all good where we are.
And if we now go to the last number page of detailed page, it's about our co-investment. This is still the old DBAG, the secure investment into the portfolio. Next quarter, you will also see the ELF commitment here, increasing the commitments. But here, we are on a good track, shaping our inflow and outflow. And as usual, we really have an eye on that and take care. So no change at all.
That's how I would at least go to the last page. This is our actuals, we have the forecast. And as Tom already said, we reiterate and reconfirm our forecast. So overall in a good shape, but in a nearly normal quarter 1, as we have seen it in the past as well.
Tom, anything else?
No. As I said in the beginning, had an uneventful quarter. We closed our transactions as expected, and I would not read too much into these numbers. We are looking forward quite confidently and feel good where we sit currently also in this kind of market.
Yes. No closing remarks from my side, except that a very uneventful quarter. We are reiterating our guidance. Obviously, when you don't have any earnings in one quarter and you still reiterate your guidance, the next quarters need to be stronger. That's not something we are afraid of. Hence, we are reiterating our guidance, and we're comfortable where we sit that right now, yes.
We are -- we have a very healthy book. We have -- our investments generated nice inquiries. And so also, last year was the highest year ever on the group base where we returned money to our investors. That set us really apart in the frozen market. That was very appreciated by our investors. And we think we're still -- we are also able to act this year, be it on the acquisition side, but also on the disposal side.
That would be all from my side. And I would leave you with that. Bye-bye.
Bye-bye.