22 COMPANIES, ONE ASPIRATION: TO ADD VALUE
Our portfolio consists of companies that are considered pioneers in their industries and individual niches, all offering potential for value growth. Exploiting this potential is the core of our business; this is what investors in DBAG funds pay us to do. Our shareholders hold a direct stake in this portfolio of mid-sized companies. Most of them are “hidden champions”: companies that often go unnoticed in the public eye but are nevertheless driving and helping to ensure the financial success of the German mid-market sector.
The revenues of the 16 companies that were already in the portfolio at the beginning of the financial year have increased by 9.8 percent. The revenue that these companies expect to report for 2017 (or for their financial year ending in 2017) were compared with the revenues achieved in 2016. Only a small part of this revenue growth can be traced back to company acquisitions that our portfolio companies used to strengthen their position. We applied weightings to the revenue growth based on the share of the portfolio value that is attributable to the company in question.
The earnings of our portfolio companies have improved by 8.5 percent on average. This figure is based on EBITDA, i.e. earnings before interest, taxes, depreciation and amortisation. The EBITDA that the companies expect to report for 2017 (or for their financial year ending in 2017) was compared with the EBITDA achieved in 2016. The calculation included the 16 companies that were already in the portfolio at the beginning of the financial year; we applied weightings to growth achieved in each case based on the share of the portfolio value that is attributable to the company in question.
On average, our portfolio companies’s debt corresponds to less than 2.6 times their EBITDA.Twenty-two companies were included in the calculation of this average, having been weighted to reflect their share of the portfolio value. The calculation was based on the EBITDA and net debt that the companies expect to report for 2017 (or for their financial year ending in 2017).
TIMES THE EBITDA VOLUME
The valuations of our portfolio companies are based, on average, on 7.5 times the EBITDA value that the companies expect to report for 2017 (or for their financial year ending in 2017). Two companies that we value using the DCF method due to their strong growth were not included. The other 20 companies were included in the calculation of this average, having been weighted to reflect their share of the portfolio value.
TIMES THE EBITDA VOLUME
The companies in the portfolio met our expectations in 2016/2017. Average revenue and earnings growth exceed the general economic trend by far. This does not mean that (in individual cases) earnings did not fall short of the prior-year value or that the revenue target was not reached, for example because surprising market changes put pressure on incoming orders, because commodities prices rose unexpectedly and significantly or because it proved harder to find the right employees than anticipated. A portfolio of more than 20 companies rarely shows uniform development. The decisive factor is the “big picture”: the key figures used to measure company success are positive. Revenue and earnings growth provide the basis that will allow us to keep our promises. We want to create value – for our shareholders and for our investors. But that’s not all: when companies show positive development, other groups also reap the benefits, such as employees, customers and the tax authorities.
There were more changes to the portfolio over the last twelve months than in previous financial years. Six disposals, in some cases resulting in proceeds at a level that is well above-average, serve as testimony as to just how successfully we have tapped into the value-adding potential that these companies offer in recent years. Our investment team also succeeded in picking out five particularly promising investment opportunities from a total of more than 300. The new companies come from different sectors, including from our core sectors, such as the automotive supply industry and the industrial services segment, for example. But we have found companies in other sectors that we would like to further develop, showing endurance, diligence and commitment while pursuing a clear aim.
The table shows the DBAG portfolio at 30 September 2017; it consists of 22 investments. It also includes investments in two older international buyout funds whose investment periods ended more than five years ago; their portfolios now contain only one (Harvest Partners IV) and two (DBG Eastern Europe II) investments respectively. The portfolio also includes an investment whose acquisition had been agreed prior to the reporting date but which cannot be included in the portfolio until the new financial year. Information on the current portfolio can be found at www.dbag.de/portfolio.
The next few pages will introduce you to 23 companies: first of all, you will find the five new investments made over the last financial year. The section that follows showcases the other companies in the portfolio, in alphabetical order (www.dbag.de/portfolio). Further explanatory information on the portfolio value can be found in the management report.
|Company||Revenues 2017 in €mn||Employees||Core business|
|Cleanpart Group GmbH||63||570||Industrial services for the semiconductor industry|
|Dieter Braun GmbH||81||1,500||Cable systems and interior vehicle lighting|
|DNS:NET Internet Service GmbH||14||100||Telecommunications and IT services|
|duagon Holding AG||22||60||Network components for railway vehicles|
|Frimo Group GmbH||237||1,300||Tools and machinery for the automotive industry|
|Gienanth GmbH||130||875||Machine and hand-moulded castings for the automotive supply industry, production of large engine blocks|
|Heytex Bramsche GmbH||115||500||Manufacture of technical textiles|
|inexio Informationstechnologie und Telekommunikation KGaA||58||180||Telecommunications and IT services|
|Infiana Group GmbH||208||800||Specialised films|
|JCK Holding GmbH Textil KG||610||1,200||Marketer of textiles and seller of merchandise|
|mageba AG||97||800||Products and services for the infrastructure and construction sectors|
|More than Meals Europe S.à r.l.||484||3,250||Chilled ready meals and snacks|
|Novopress KG||n.a.||100||Tool systems for the sanitary, electrotechnical and construction industries|
|Oechsler AG||374||2,400||Plastics technology for future industries|
|Pfaudler International S.à r.l.||234||1,400||Mechanical engineering company for the processing industry|
|Plant Systems & Services PSS GmbH||37||210||Industrial services for the energy and process industry|
|Polytech Health & Aesthetics GmbH||38||180||Provider of high-quality silicone implants|
|Rheinhold & Mahla GmbH||104||480||Interior outfitting for ships and marine installations|
|Silbitz Group GmbH||162||1,050||Hand-moulded and automated moulded castings with steel and iron bases|
|Telio Management GmbH||40||110||Communications and media systems for correctional facilities|
|Unser Heimatbäcker GmbH||139||2,700||Bakery chain|
|vitronet Projekte GmbH||36||100||Construction of fibre-optic networks|
|Investments in international buyout funds managed by third parties|
|DBG Eastern Europe II||In the disinvestment phase since 2010; the portfolio now only contains two out of ten original investments|
|Harvest Partners IV||In the disinvestment phase since 2007; the portfolio now only contains one out of nine original investments|
|Investment that had not yet been completed at 30 September 2017|
|Radiology Group||63||550||Radiology services and treatment|
Revenue in 2017: revenue was mainly as expected for 2017; some companies have financial years that deviate from the calendar year.
duagon Holding AG, mageba AG: figures in CHF; Pfaudler Process Solutions Group: figures in USD.