Financial review of Deutsche Beteiligungs AG (commentary based on the German Commercial

Transcription

1 84 combined management report Financial review of Deutsche Beteiligungs AG (commentary based on the German Commercial Code HGB) The management report on Deutsche Beteiligungs AG and the Group management report for the truncated 2014/2015 financial year are presented combined, in conformity with 315 (3) HGB in connection with 298 (3) HGB. The presentation of the economic position of DBAG is based on an abridged balance sheet and an abridged profit and loss account derived from the balance sheet and profit and loss account as prescribed by HGB. The complete annual financial statements of DBAG based on HGB are published in the Bundesanzeiger (Federal Gazette), together with the consolidated financial statements. The separate financial statements are accessible at investor-relations; a printed version is also available on request. When comparing the current data with that of the preceding year, it should be kept in mind that the 2014/2015 financial year was a short eleven-month financial year. The previous year s profit was significantly influenced by a high capital gain on the disposal of a large investment (Homag Group AG). The net effect (after considering performance-related remuneration) from the previous year s disposals amounted to 54.5 million euros. A year-on-year comparison is therefore limited. Earnings position Overall assessment: Balanced result through gains on smaller disposals and current income from portfolio companies In 2014/2015, DBAG recorded a profit for the year after eleven months of 2.2 million euros, or 63.2 million euros below that of the preceding 2013/2014 financial year (65.4 million euros); for that year, a total dividend of 2.00 euros per share was paid in March 2015, which consisted of a base dividend of 0.40 euros per share and a surplus dividend of 1.60 euros per share. Whereas in the preceding year an exceptionally large investment (Homag Group AG) was very profitably divested, no investments in portfolio companies were ended by way of a sale in 2014/2015. Fee income from fund management and advisory services remained nearly stable and formed the basis of this year s slightly positive result. Net result of fund services and investment activity: Significantly lower following very profitable prior year Overall, the net result of fund services and investment activity, totalling 24.6 million euros, was clearly lower than that of the exceptionally profitable preceding year (90.6 million euros); no appreciable disposals of investments took place in 2014/2015, which normally determine the net result of valuation and disposal.

2 annual report 2014/ Abridged profit and loss account of Deutsche Beteiligungs AG (based on HGB) T 2014/ / months 12 months Net result of valuation and disposal 1 (16,979) 58,590 Current income from financial assets 22,390 11,963 Fee income from fund management and advisory services 19,199 20,093 Net result of fund services and investment activity 24,610 90,646 Personnel expenses (14,882) (16,434) Other operating income (without write-ups) 2,687 4,002 Other operating expenses (7,821) (10,812) Depreciation and amortisation on intangible assets and property, plant and equipment (506) (416) Income from other securities and loans within financial assets Other interest and similar income Interest and similar expenses (3,076) (1,810) Total other income/expenses (22,392) (24,806) Result of ordinary activity 2,218 65,840 Income taxes 0 (405) Other taxes (19) (7) Profit for the year 2,199 65,428 1 the net result of valuation and disposal is composed of profit-and-loss items Income from disposals of investments of 3.6mn (previous year: 58.6mn) and write-ups in the financial year of 0.0mn (previous year: 0.3mn) that are recognised in item Other operating income. Losses on disposals of investments and Write-downs on financial assets in the amount of 20.6mn (previous year: 0.4mn) were deducted. It is determined by gains or losses from disposals of investments as well as write-downs netted against write-ups on investments contained in the portfolio at the reporting date. Write-downs and write-ups are performed at the lower of cost or market and the applicable procedure for reversals of impairment losses. The upper ceiling for write-ups is the historical cost. The net result of valuation and disposal of million euros (previous year: 58.6 million euros) contains gains on disposals of 3.6 million euros stemming from divestments from the portfolios of international buyout funds as well as from successful transactions of former financial years. However, it largely reflects the write-down on an associate, after this entity distributed 20.0 million euros to the parent company for liquidity management reasons. This distribution of 20.0 million euros determined the current income from financial assets of 22.4 million euros, which is 10.4 million euros in excess of the prior year s 12.0 million euros. This distribution, which is typical of the business, stems from retentions on disinvestments of previous periods, but primarily also from the maturity of securities in which free liquidity had previously been invested. Also recognised herein are profit distributions and interest income from portfolio companies totalling 2.4 million euros (previous year: 2.5 million euros). Combined management report Fee income from fund management and advisory services of 19.2 million euros (previous year: 20.1 million euros) comprises the fees earned for the eleven-month period. DBG Fonds I contributed 1.5 million euros towards this item for the last time.

3 86 combined management report Other income/expenses: Lower due to reduced personnel costs The net amount of Other income/expenses of million euros was somewhat less than the previous year s million euros. Contained herein are personnel costs of 14.9 million euros. They decreased by 1.6 million euros, because variable emoluments linked to the performance of individual transactions were considerably lower; the shortened financial year also had an effect. Other operating income without write-ups declined from 4.0 million euros to 2.7 million euros. Now that consultancy costs in connection with screening investment opportunities are charged by the management company directly to the funds, these income and expense items will decrease at DBAG. Other operating expenses amounted to 7.8 million euros in the financial year, or 3.0 million euros below those of the prior year (10.8 million euros). The largest position in other operating expenses are the external expenditures for screening investment opportunities (partly chargeable to the DBAG funds); these costs decreased from 2.7 million euros (2013/2014) to 1.4 million euros (2014/2015), due to the change described. The financial result was negative (-1.9 million euros; previous year: -1.1 million euros); it again was considerably lower than that of the preceding year. Slightly higher income from interest and securities of 1.2 million euros (previous year: 0.7 million euros) is due to a larger securities position on an annual average and the moderate rise in interest rate levels. However, the interest rate used to calculate pension obligations in the HGB format declined again, namely from 4.62 percent to 4.07 percent. 22 Interest expenses therefore rose by 1.3 million euros to 3.1 million euros. Profit of 2.2 million euros for the year Deutsche Beteiligungs AG posted an annual profit of 2.2 million euros for financial year 2014/2015, following 65.4 million euros in the preceding year. The Company s return on equity was 0.9 percent, compared with the prior year s 23.2 percent. Including the profit carried forward from the previous year and the dividend payment, the retained profit amounted to 67.1 million euros. Asset position Asset structure changed following high level of investment The major asset positions of Deutsche Beteiligungs AG are the directly held investments that are shown in Investments, in addition to equity shares in associates, which, for their part, hold further investments: until 2006, DBAG primarily held investments directly; since then, these are held indirectly as a result of the structure of DBAG funds. Also, non-current 22 it is determined by the Deutsche Bundesbank and considers the average interest rate trend over the past seven years. In deviation from that, the interest rate of 2.08 percent (previous year: 1.78 percent) used in the consolidated financial statements is based on the annual interest rate movement in corporate bonds.

4 annual report 2014/ assets include investment securities; these securities constitute significant parts of the financial resources of DBAG. Together with cash and cash equivalents, these resources are available for future investment. Interests in associates rose by 48.1 million euros, up from million euros to million euros in financial year 2014/2015. The increase is due to extensive investment in seven new portfolio companies and financial support for existing investments for add-on acquisitions. Conversely, the distribution-related write-down on the interest held in an associate accounted for a charge of 20.0 million euros. The value of directly held investments declined significantly to 17.7 million euros (previous year: 19.9 million euros). Investments are made indirectly, write-ups are capped at acquisition cost, and there were no impairment losses to be recognised. Investment securities were used to finance investments and therefore decreased in the financial year in net terms by 67.4 million euros to 29.7 million euros. Abridged balance sheet of Deutsche Beteiligungs AG (based on HGB) T 30 Sept Oct Equity shares in associates 176, ,013 Investments 17,700 19,900 Loans to portfolio companies 2,516 0 Long-term securities 29,707 97,073 Other non-current assets 1,801 1,455 Non-current assets 227, ,441 Receivables and other assets 28,718 27,309 Cash and cash equivalents 15,629 23,302 Current assets 44,347 50,611 Prepaid expenses Miscellaneous assets 0 1,908 Assets 272, ,304 Subscribed capital 48,533 48,533 Capital reserve 141, ,394 Retained earnings Retained profit 67,123 92,276 Equity 257, ,606 Combined management report Provisions 14,366 16,481 Liabilities Liabilities 272, ,304

5 88 combined management report Current assets: Decreased due to lower cash position Current assets declined in the past financial year: at 30 September 2015, they amounted to 44.3 million euros, or 6.3 million euros less than those of the previous year. Cash and cash equivalents accounted for approximately one-third of current assets at the reporting date; another constituent under this item was a receivable from a portfolio company arising from non-distributed profit entitlements. Provisions: Lower than in the previous year Provisions amounted to 14.4 million euros, or 2.1 million euros less than those of the previous year (16.5 million euros). Provisions were chiefly made to cover performance-related income components; 6.0 million euros thereof are attributable to the reporting year, and 4.8 million euros were made over the last eight financial years, but are still subject to a payout stop. Pension provisions of 1.1 million euros were made for the first time; in the preceding year, the fair value of plan assets had still exceeded pension obligations. Financial position Particularities in assessing financial position: Cash flow characterised by irregular outflows The financial resources reported at the end of the period of 45.3 million euros (investment securities of 29.7 million euros and cash and cash equivalents of 15.6 million euros) are available to meet investment commitments. Based on the investment progress planned for the coming three to four years, DBAG will have an average liquidity requirement of some 50 million euros annually; the actual requirement may fluctuate strongly. Capital structure: No liabilities to banks In financial year 2014/2015, DBAG financed its activities from its available financial resources. At 30 September 2015, the Company reported equity of million euros, which compares with million euros at 31 October 2014; of that amount, a dividend of 27.4 million euros was paid to shareholders in March The capital-to-assets ratio of 94.5 percent (previous year: 94.4 percent) remained very high. Comparison of actual and projected business performance Profit for the year: Business trend confirms forecast In 2013/2014, the profit for the year of 65.4 million euros largely derived from a highly profitable disposal. Whether such a disposal would be possible in 2014/2015 was not foreseeable at the beginning of the financial year. For that reason, we had forecast that the profit for the year would clearly fall short of that posted for the past financial year of 2013/2014. This financial year s result confirms that forecast.