A drop in stock market valuations took an €11.7 million hit on the portfolio of German private equity stalwart Deutsche Beteiligungs (DBAG) in the three months to 30 June, according to the firm’s latest update.
The listed firm said the public peer group it uses to value its portfolio was valued at “a significantly lower level” than three months previously, due to the outcome of the Brexit referendum. This dragged down the valuation of the €264 million portfolio by €12.7 million. Around half of the valuation drop was offset by growth within the portfolio, leading to a net contraction of €5.7 million in the quarter.
“Stock market valuation ratios have a direct effect on DBAG’s net income through the quarterly valuation of the portfolio at fair value,” the firm said. “Due to these external effects, the results of individual quarters may fluctuate strongly.”
However, the firm said these short-term changes are “of little significance for DBAG’s long-term performance and the quality of the portfolio”, and that the portfolio is “well poised”.
Net asset value per share has increased by €0.93 since last October to €23.09 at the end of June.
Last month Private Equity International reported that DBAG has raised €1 billion to invest in a “broader range” or investments. DBAG Fund VII comprises two parallel funds: the €800 million “principal” fund and a €200 million “top-up” vehicle which will be used for larger deals requiring an equity commitment of more than around €80 million.
In its update, DBAG said the new fund boosts the future basis for fee income from fund investment services. DBAG’s co-investment alongside the fund – €183 million in the principal fund and €17 million in the top-up fund – is almost twice the €133 million committed to Fund VI, which is expected to lead to “robust growth” of net asset value in the medium term.
This, coupled with more stable inflows from investments, will allow DBAG to continue with its plan to move toward a more consistent dividend for shareholders, it said. At the next annual meeting the board of management will recommend paying a single dividend instead of a base and a surplus dividend, and that the dividend recommendation for the current year should be at least in line with the previous year’s of €1.
Earlier this week DBAG acquired a majority interest in Frimo, a maker of tools and machines for the production of plastics. DBAG will invest up to €15 million from its balance sheet for a stake, with the remaining interest to be held by the €700 million DBAG VI and the company’s management team.