Deutsche Beteiligungs scrapes through with small profit

The German private equity house found 2001 tough going, but says it is ready to recover if market conditions improve in 2002.

Deutsche Beteiligungs AG has posted a pre-tax profit of E5m for the financial year 2000/2001 ending October 31. 1999/2000 had resulted in E43m of pre-tax earnings.

The firm, which focuses on the German mid-market, described the last year as difficult, saying economic and political developments had interrupted progress made during the past five years.

Profit distributions from portfolio companies dropped from E21m in 1999/2000 to E15.4m. Although Deutsche booked capital gains from selling Gong Verlag, the magazine publisher, and AvK/SEG Holding, overall capital gains shrunk from E57m to 21.6m during the period. The value of three investments was written down, and one portfolio company, Libro in Austria, was sold off for a nominal price. The IPO of Lignum Technologie, which was supposed to boost last year’s earning, was cancelled due to poor market conditions.

Deutsche was also forced to scale back investment activity significantly. New investment amounted to a mere E31m, following E101m the year before.

In a statement, the firm said the recent stagnation was not a source for concern. “The basic long-term growth trend remains sound”, said Wilken von Hodenberg, chairman of the board.

Germany’s private equity market was predicted to grow in line with Germany’s maturing capital markets. “Additionally fueling the market will be the changes brought on by ‘Basle II’: these changes will largely hit mid-market companies – the investment focus of Deutsche Beteiligungs AG for many years”, the firm said.

It also said that a number of its more mature investments have been prepared for exit, although deals would remain difficult to complete unless capital markets stabilised.

The volume of the firm’s current portfolio stands at E311m, invested in 49 businesses.