From Berlin. My name is Constantin Mang. I'm Chief Executive Officer of MBB. I'm looking forward to presenting our Q1 figures to you today. Let's start with a quick recap on what makes MBB special. As you know, we offer long-term succession solutions to sustainable Mittelstand companies. We do so differently than most private equity and financial investors because we are a family business ourselves. That means we share a DNA with the businesses that we want to acquire. Secondly, we are fans of the capital markets. Therefore, not only MBB itself is a stock listed company, but also three of our subsidiaries, namely Friedrich Vorwerk, Aumann and Delignit. Thirdly, we have a long-term focus, meaning we don't acquire companies in order to sell them again after a few years, but we really want to develop them in the long term.
Finally, we have a focus on sustainability and our companies benefit from trends such as the energy transition and e-mobility, for example. Before we dive into the details of the first quarter, let me highlight three of my favorite figures from this quarter, number one, the order intake of Friedrich Vorwerk in the first quarter, which is EUR 207 million, which corresponds to a 67% increase over the last year's quarter. The second figure comes from our secret growth champion in the MBB group this quarter, which is the revenue growth of Delignit amounting to 68% in the first quarter. The third figure comes from Aumann. Aumann was able to grow its revenue by 24% in the first quarter, which is also a very remarkable achievement.
Let's look into the details and let's start with our service and infrastructure segment, where we combine Friedrich Vorwerk and DTS. As I mentioned before, Friedrich Vorwerk had a strong order intake. Most of this order intake actually comes from electricity orders. This is exactly the shift that the management of Friedrich Vorwerk has expected, namely, that we see a strong growth coming from the energy transition towards electrification. Besides that, Friedrich Vorwerk was also able to attract a new order in the hydrogen business for an Electrolyzer, including all the Balance of Plant. This shows that the company is also well-positioned in this area of growth.
In total, Friedrich Vorwerk was able to increase its revenues by 25% to EUR 73 million in the first quarter, but the EBITDA margin was significantly lower than in the previous year. We had 8% EBITDA margin, which is also slightly below or which is actually significantly below the forecast for the full year. However, taking into account that the first quarter is usually the weakest for Friedrich Vorwerk, the management of the company is still very confident that it will be able to reach its full year forecast. The reason for the lower margins in the first quarter are mostly related to follow-up work that had to be done for certain projects that were finished under high time pressure in the fourth quarter.
This follow-up work is usually associated with a low margin. This is nothing really extraordinary, but unfortunately, it all fell into this first quarter, which led to this lower EBITDA margin. Looking on the right side with DTS, we see lower revenues that came in at EUR 20 million in the first quarter. However, it is important to keep in mind that last year's first quarter was unusually strong with a couple of extraordinary effects. The year-to-year comparison is not very favorable here for DTS. The health of the company, I think is still very strong, which is also visible in the EBITDA margin, which came in at 16%. We have a very solid profitability. We also have a strong order book.
It's just that revenues were significantly below the previous year's quarter. However, we expect a rebound over the remaining year, and hence also a growth for DTS in the full year. Turning to our technological applications segment, where we look at Aumann and Delignit. We have Aumann with a very strong order backlog of EUR 277 million, and that corresponds to a 29% growth year-over-year. It's mostly driven by orders in the mobility field, battery driven orders, but also automation solutions for other renewable industries, such as the solar industry, for example, are bolstering this order intake and also bolstering the revenue growth, which came in at 24% in the first quarter.
This is especially good news as also the EBITDA margin was able to recover further. We are now at an EBITDA margin of 6% and therefore, well, in line with our expectations for the stepwise EBITDA margin recovery. At the moment, I think that the momentum in the market for Aumann is still very strong, and therefore the company comes into a position where it can cherry-pick again, which orders they accept and which they don't, because the utilization for this year is already very high. Basically, Aumann is close to being fully booked. Therefore, each additional order that Aumann takes in for 2023 comes also with a very attractive margin.
When we look at Delignit, I was mentioning at the beginning that Delignit is a secret growth champion. Here again, we see EUR 24 million revenues in the first quarter corresponding to a growth of 68%. What did Delignit do differently this year? To be honest, they didn't do much differently, but the customers who had significant supply bottlenecks than next last year are finally able to meet the demand, and therefore Delignit can basically show what it is able to do and what it had expected to also show before. The first half of 2022 was a bit difficult due to all these supply bottlenecks.
If you are looking at the last 12 months, we are already talking of revenues that exceed EUR 85 million, and that really shows how strong the growth path is that Delignit is currently on. This also affects profitability in a positive way, of course, because due to the higher utilization, also the EBITDA margin is able to expand. Let's take a look at our consumer goods segment, where we have Hanke Tissue and CT Formpolster. You see that both companies grew revenues, Hanke by 26% and CT Formpolster by 36%. However, much of this growth is actually driven by inflation effects, by price effects. The actual demand is relatively moderate, and especially in the case of CT Formpolster, we expect the demand for mattresses to be a bit lower during the summer months.
Nevertheless, the growth will probably remain driven by the price effects. This means that the profitability will remain challenging in the consumer goods segment for the coming months. When we look at the three aggregated segments here, you see that actually all three of them were able to grow revenues, the service and infrastructure segment by 10%, the technological application segment by 21%, and the consumer goods segment by 30%. However, you also see that on the one hand, the service and infrastructure segment came in at a much lower EBITDA, while the technological application segment came in at a higher EBITDA. The higher EBITDA of technology, of the technological application segment was actually able to compensate, at least partly, for the lower EBITDA in the service infrastructure segment.
The consumer goods segment is, as in the previous year, at a very low profitability and remain constant in that sense. For the whole group, this means that revenues were able to grow by 17% and reach EUR 201 million in the first quarter, and EBITDA went down slightly by 7%, which also means that the EBITDA margin came down a little bit and is not quite at the level where we want it to be over the full year. If you take a look at our forecast, you see that we expected revenues of EUR 850 million-EUR 900 million in the full year 2023.
I think after this first quarter, we are well on track. As I mentioned on the slide before, the first quarter is stronger in terms of revenue. You also see that on the EBITDA side, we are expecting an EBITDA margin from 9%-11% for the full year, and at the moment we are slightly below that. However, we believe that the coming quarters will have higher profitability, and therefore we also confirm this forecast, even though it looks a little bit more ambitious at the moment on the EBITDA side, especially compared to the revenue side. Let's take a look at our balance sheet. You know that MBB has a very strong equity ratio, which came in at 70% at the end of the first quarter.
Our net cash position reached EUR 384 million in the whole group. Out of these EUR 384 million, EUR 332 million are actually on the holding level, MBB SE. Of course, we want to use this cash to, first of all, let our shareholders participate in our success. We propose a dividend of EUR 1 per share. As you know, every year we pay an increasing base dividend, which has been at EUR 0.99 last year, and this year, will be EUR 1. On top of that, in certain years with extraordinary successes, we also paid the double dividend.
As there's no extraordinary effect this year, we will propose to stick with a base dividend of EUR 1, amounting to a dividend of EUR 5.7 million in total. We also have a share buyback program, which so far had acquired shares in the value of EUR 7 million. As you see, combining these two, we are returning EUR 12 million to our shareholders this year. We also want to use our cash to acquire new businesses. That's the core of our business model. Currently, we see interesting market conditions in the M&A sector. Of course, we still have economic uncertainty. We have the volatility in commodity prices on the one hand, on the other hand, recession worries and inflation worries.
We also have increasing financing costs, which are both good and bad for us. But it is clear that it becomes more difficult for companies that acquire businesses with a lot of leverage to continue doing so, because the leverage has just become much more expensive than it was last year. Thirdly, we have a rebound in the general deal activity. We feel that also many transactions that have been postponed last year are coming back now. Maybe now we are talking about more realistic pricing levels.
You remember I told you last year that it was a bit difficult to meet with sellers of companies because the expectations of the sellers were so fundamentally different from our readiness to pay since the sellers were not quite reflecting the new interest rates into their price considerations. I think we are now coming into a time period where this is more and more reflected in the expectations of business sellers. Looking at our positioning in the M&A market, I believe that we will continue to see the succession pressure in the German small and medium-sized market simply due to structural demographic reasons. I think as MBB, we are ideally positioned to benefit from that.
We are also more competitive compared to private equity investors because at the moment, as financing becomes more expensive and also more difficult to obtain, our position as a mostly equity finance acquirer in the market is gaining in relative strength. As I mentioned before, I think we slowly see that also the valuation expectations in the M&A market are coming down. If we combine our good positioning with now maybe revised expectations in terms of valuation levels, I think we should see lots of interesting opportunities for us in order to successfully acquire new members for our MBB Group. Last but not least, let's take a look at our sum of the parts valuation at the moment.
As you know, you can derive basically a valuation of MBB by looking at the shares in our stock-listed subsidiaries, Vorwerk, Aumann, Delignit. These combined shares are currently at around EUR 243 million. If you add then the holding cash, which is currently at EUR 332 million, you end up at a higher value than our current market capitalization, a significantly higher value, and that doesn't take into account all our private companies. Therefore, we still believe that our valuation at the moment is unusually attractive. Hence, we also think that purchasing shares as we have done in the first 4 months of this year is a good idea in order to benefit from this mispricing at the moment. Thank you very much.
I'm, now at the end of my presentation, and I'm looking forward to your questions.
Thank you very much, first of all, Mr. Mang, for your presentation. We are now taking the questions either by chat or by audio line. In case you have dialed in via phone, please press the star key followed by 9 and then the star key followed by 6. You received the first question via chat. You announced to make a substantial investment in the production of regenerative energy. Which measures and what level of CapEx are planned?
I announced a substantial investment. To be honest, I'm not quite sure which announcement you are referring to. Could you maybe re-read the question? Because I'm, to be honest.
It's. Yeah, you can also read it in the chat, that substantial investment in the production of regenerative energy are made, and which measures and what level of CapEx are planned.
Maybe this is a misunderstanding and what is meant here is the investments into energy infrastructure, which we see in the market in which Friedrich Vorwerk is actually operating. What we were referring to was more the investments of especially German electricity providers. These investments are basically potential market opportunities for Friedrich Vorwerk, and these investments are the reason why Friedrich Vorwerk is currently growing at a high pace and also attracting a lot of order intake. I think that is probably what we've been referring to here. We are not talking about CapEx of MBB itself.
Should there be still anything unclear regarding this topic, kindly be requested to place a follow-up question on that topic. In the meantime, we continue with the questions from KBW. Your line is now open. Please go ahead. We cannot hear you yet. Now you have unmuted yourself. On the bottom left side, you're able to select the microphone because unfortunately we cannot hear you yet. With regards to the time, I suggest that we continue with the question from the chat, and in the meantime, just have a look at the microphone settings and we will get to you, back to your questions. It's now from Jens Biermann. The question, Friedrich Vorwerk is trading significantly below its IPO price. Is there any intention to buy back shares of Friedrich Vorwerk from MBB side?
Yes, you're absolutely right. Friedrich Vorwerk is unfortunately trading significantly below its IPO price, and therefore we are carefully, you know, looking at whether it makes sense for MBB to buy back shares. I mentioned during the presentation that we bought back a lot of MBB shares in the first four month of the year. That seemed to be the, you know, most obvious buyback that we could make. Also Friedrich Vorwerk is a potential candidate where we can generally imagine to increase our shareholders. We haven't done so in the first quarter.
All right. Thank you very much. Could you please give us some color on the order intake at DTS, giving us indication in terms of book-to-bill and order intake growth by year-on-year in Q1?
Yeah, we don't really publish order intake or order backlog figures of DTS. What I can tell you is that the order backlog has definitely increased since the beginning of the year. That sounds a bit counterintuitive. How come the order backlog has actually increased while the revenue was not very strong? Basically, two things or a few things happened in the first quarter. One of them is that some of the orders at hand were not realized in the first quarter for different reasons. These orders are not vanished. They are still on the books and will become revenue later the year. For several reasons, they couldn't become revenue in the first quarter.
The order intake was actually not bad. We are not talking about any, I would say, structural issues in the company. I think market demand is pretty healthy. IT security is still a topic that is very hot at the moment. Many companies realize that they need to invest in it. I would say the first quarter is a bit special, both in the comparison to the previous year, but also in what exactly became an revenue and what stayed on the order book. We expect the next quarters to be significantly stronger.
Thanks a lot, Mr. Mang. The next question. A buyback of EUR 12 million was announced. So far, EUR 7 million have been executed. Will the additional EUR 5 million of the mandate be bought back at a later date? Have you placed a final date when the program should end?
Yeah. This is mostly related to technical issues or details in the buyback program. The buyback program has ended, and the reason why we put an ending date on it is that it is a bit easier if it's not running while the annual general meeting is taking place, because then you don't have to change the dividend proposals and so on during the period when the invitation is already published. A very technical reason why we wanted to have it ended right before we published the invitation for the annual general meeting.
The reason why less than EUR 12 million was bought back in that time horizon is also a technical issue because when we buy back shares, we want to make sure, and we have to make sure that we are not influencing the share price too much on any given day and therefore, the kind of orders that the bank is able to place in the name of MBB are very limited in how far they can deviate from the last closing price and so on. That means that it is difficult to exactly predict the amount of shares you can buy back in a given period simply because you need to avoid that you basically influence the share price too much.
We bought back less than EUR 12 million that were announced. Both pretty, I would say, boring explanations why it happened, but nevertheless, I think EUR 7 million is also a good number, and it might well be that we have another share buyback later the year.
You received another question, regarding DTS. Could you please give us some more insights on the growth of the software part of the business in Q1?
Yeah. The software part is developing very well, especially because a few new products were also launched under the DTS brand. You know, we have basically several brands, one which is coming from the ISL acquisition we did a few years ago, but we also publish more and more products under the DTS brand itself. The sales pipeline for these products is pretty good. The order intake is also pretty good. We also see an increase in software sales. However, I think that the next quarters will show higher growth figures also in the software part compared to the first quarter.
Thanks a lot. At this stage, a kind reminder, if you still have topics to be addressed, kindly submit your questions. Regarding M&A, could you please provide some more details? Are you close to doing a deal or only in preliminary discussions?
Our ideal deal pipeline has projects that are in kind of all stages. We seldomly have only opportunities that are in very preliminary discussions and ideally also don't have only transactions that are very advanced already because of the binary nature that these discussions have, right? They either are successful or they are not. What you don't want is that with one successful or non-successful negotiation, you basically empty your complete pipeline. Yes, we do have transactions at the moment that are in more preliminary discussions and we also have more advanced discussions. However, I don't expect any of these more advanced discussions to come to an signing within the next, let's say, six weeks.
We are not immediately in front of making any definite agreements, but the pipeline is very healthy. Comparing to historical figures, comparing to last year figures, it's a very healthy pipeline that we are looking at.
Thank you very much. Could you please share with us some details of your current M&A strategy though, for example, with regards to your focus sector, add-on acquisitions or, if you would like to, or if you plan to enter new markets?
Yes, of course. We see a lot of potential both in standalone and in add-on acquisitions. Let me maybe start with these add-on or bolt-on acquisitions for our portfolio companies. We believe that there are a few industries, for example, the automation industry that Aumann operates in, that are very interesting for acquisitions at the moment. And the reason for that is that the industry is showing a rather large momentum at the moment after 2, 3 more difficult years. The rebound in profitability that I was talking about before that we see at Aumann at the moment, is also something that we expect to see with other companies in the automation industry. Therefore, I think that this is an industry where it definitely takes...
makes sense to look at potential acquisitions at the moment. The same is true for DTS in the IT security field. DTS is an excellent platform. They had revenues of more than EUR 100 million last year, and this platform can be strengthened by further acquisitions. What we don't want to do is buying basic resellers of software and hardware that don't add anything to the platform DTS. I think there are also lots of interesting companies that might add value to the platform and at the same time can benefit from the platform that DTS has.
I think these two areas, automation industry on the one hand, IT security on the other hand, are especially interesting when we look on at bolt-on acquisition opportunities. On the standalone side, we are much more open. We look at all kinds of companies. I think that at the moment, there are quite a few interesting companies in growing industries that are struggling with the current financing environment. Of course, during the last two, three years, it was rather easy to get financing as a company, and at the moment it is becoming more and more difficult.
I think we might see more opportunities, in this structural area where we are not necessarily or we don't look at restructurings or companies with operational problems, but there might be companies that are structurally well-positioned but have difficulties with their balance sheet, and this might become a more interesting area this year. Companies that might fit sort of this description are maybe especially interesting at the moment.
Thank you very much. One of the investors is stating that your current portfolio of businesses have rather low margins and high top-line growth. Would you expect to buy businesses with higher levels of margins?
Well, first of all, I'm not sure if I agree with the general statement at the beginning. Yes, we have companies like Friedrich Vorwerk that are showing lower profitability than a year ago. Nevertheless, we believe that, you know, some of these effects are temporal in nature and not structural. We believe that with the EBITDA margin forecast of 9%-11%, we don't have a generally low profitability portfolio. Nevertheless, I do understand, of course, what you are hinting at. When we look at new companies, we like double-digit profitability in EBITDA, that's for sure. As I said before, we are not looking at restructuring cases. Nevertheless, we are also...
when a company is profitable, you know, the profitability has also been in a, has also to be in a good relation with the growth perspectives on the one hand. We don't want companies that only have high profitability today but no growth potential. Of course also, the valuation of the company plays a role here. There are different financial figures that we are looking at. Of course, profitability is very important for us, but it has also to be in a good balance with other figures.
Could you please elaborate a little bit more on the long-term investment strategy?
The long-term investment strategy in terms of M&A, I think I tried to describe already a little bit, so maybe let's talk more about then the organic investments that we see in our portfolio. We believe many of our subsidiaries currently have interesting growth opportunities. As you saw, many of our subsidiaries have very high double-digit growth at the moment. Of course, we see an opportunity in this growth. Whenever there is a chance to invest in order to bolster that growth and in order to get a good return, then we want to strengthen our portfolio companies through investments. This is something that is typically benchmarked also within our whole group.
The returns that potential investments, organic investments, offer are not looked at on a case-by-case basis, but are benchmarked with all kinds of investments that we can potentially do within our group. There are interesting opportunities for us, and for our companies basically, to invest in further revenue and cash flow growth.
What is the return on capital that you are looking for?
Well, we don't set a clear return on capital goal. The reason is that we don't have, as I said at the beginning, fixed holding periods. If you look at the return that we managed to realize over the last decades, this return was often also very much impacted by certain events like IPOs of our subsidiaries. These events are not something that we want to plan or want to, yeah, have in a certain timeframe. Which makes it a bit difficult to set specific benchmarks in that regard.
I wouldn't feel comfortable, now giving a specific number here, because this is not necessarily, what we have in mind when we invest in new businesses.
Thank you. Could you please confirm if it appears correct that the current inflation rate seems to be far too high and not the very best way to increase total shareholder value?
Could you please repeat the question? I'm sorry. I didn't.
Yeah. If you please-
The-
If you could confirm if it appears correct that the current inflation rate seems to be far too high and not the best way to increase total shareholder value?
Well, I think, our goal is to provide and to create shareholder value in all kinds of economic regimes, right? Of course, in some regimes it's harder than in others to create shareholder value. As a group, our goal should be to increase the value for our shareholders, both in high and in low inflation regimes. Of course it is nicer to have a easy or a growing market environment than a market environment which is more difficult. I don't think it's impossible to create shareholder value in more difficult economic environments.
All right. Mr. Biermann, if there's still something you would like to follow up on, kindly be requested to raise your hand. You're doing so please go ahead if there's a follow-up question.
Can you hear me?
Yes, we can hear you well.
That's great. Hello, Constantin Mang. My name is Jens Biermann. I'm a private shareholder. My question with regard to the shareholder value was a little bit different. As we all know, it's not so easy to employ EUR 300 million in cash from the balance sheet. I would be interested in your long-term strategy. Is your mid and long-term strategy really to employ the total capital, so to find investments over the next year for the entire amount? Or do you have a portion in mind which should be used for further buybacks or for dividend payments? Do we have a split in mind?
Okay, I see where you're getting at now. Of course, this is a question that is very much depending on the environment we are in. At the moment, as I mentioned during the presentation, we feel, you know, that of course it makes sense to return some of our cash to our shareholders through dividends and buybacks. This might change a year from now. You know? The opportunities that we have need to be, I think, benchmarked constantly.
Yeah
... I'm not sure if it would be the best strategy to have a fixed rate of cash that we want to return no matter what other opportunities are, or a fixed rate that we want to invest into stock repurchases no matter what the price of our stock is. You know? I think, we need a little bit of flexibility in this allocation questions.
Yeah
... in order to react to the market environment, to opportunity costs, to interest rates, and to be fair also on our own share price.
Yeah. Thank you. Yeah. Do you agree that it will be ambitious also having a look at the history of the company to invest EUR 100 million-EUR 200 million of fresh equity? This, from my perspective, this... If you really wanna do this would need to change the investment strategy, yeah? I think you will not do it, yeah? Because you
First of all, I completely agree that it is ambitious, and I find nothing wrong with that, to be honest. I would be a bit disappointed if we have a non-ambitious goal. Of course, in the last years, we have not invested capital at the pace that would now allow me to forecast that these EUR 300 million are going to be invested in 2 years' time or something, right? Nevertheless, we are not changing our investment strategy and we are, I think, as sensitive as we've always been when we look at new opportunities.
I think there are times when it makes sense to be a bit more careful and you know, in hindsight, I'm very glad that we didn't make a major acquisition last year because the prices on the M&A market have not gone up since then. Maybe there are times when it makes sense to also be a bit more ambitious and you know, also look at larger potential acquisitions. I don't know whether it is the right approach to look at the last two years and to forecast it into the future and then see at which rate we will be able to invest the money that we want to invest.
Yeah. Fully agree. Thank you very much. This might have changed a little bit, and this was my question, is you have 7% of inflation. The cash on the balance sheet is worth less 7% 1 year later if you are not able to invest it. It might have changed your approach to distribute more money if there is not the opportunity to invest such a high portion, yeah? I think I get your point and I fully understand it. Thank you. All right.
Thanks for your questions, Mr. Biermann. With regards to the time, we come to the final question. Constantin Mang, if you could please provide a short update on the alterations in the liquid securities portfolio with regards to bonds, equities, et cetera.
Well, as you saw, we have not increased our holdings in government bonds from the end of last year to the end of the first quarter. This is a figure that remained relatively constant and at a bit high of EUR 80 million. The duration of these government bonds is relatively short term, so we are talking about less than a year mostly.
All right. Thank you very much. As we are coming now to the end of this earnings call, thank you very much to all participants for your interest and your questions, and of course to you, Constantin Mang, for taking the time, having the presentation and answering all the questions. I hand over to you for some final remarks.
Thank you very much. As we are running a bit over time, I want to keep my final remarks short. I'm very happy that many of our companies were able to grow in a not so easy environment in the first quarter. The profitability will have to come back and rebound over the next month, but I'm optimistic that this is exactly what we are going to see. Therefore, I'm looking forward to the coming month that will probably also, as we've addressed in the last 20 minutes, offer a few more M&A opportunities, and therefore I think it's potentially exciting month ahead, and I'm looking forward talking to you after the second quarter.