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DR. JOHANNES SCHMIDT ON THE DEVELOPMENT OF THE INDUS PORTFOLIO The INDUS portfolio will continue to grow over the next few years. The cross-sectionality of its services will also continue to evolve.

Dr. Schmidt: To what extent has COVID-19 put pressure on the Group to transform again?

Dr. Johannes Schmidt —

I like to use the example of an iceberg floating just below the surface here. When the water level is lowered, the iceberg suddenly becomes visible. In the same way, the coronavirus pandemic has revealed weaknesses in the portfolio – which the Board of Management has been working to address. With our “Powering Ahead” package of
measures, which we introduced in the middle of 2020, we have taken a targeted approach to overcoming these weaknesses. We made great progress with this in 2020. As part of the PARKOUR strategy program, we had already set ourselves the goal of increasing the fitness of our portfolio companies, enabling our portfolio companies to develop faster, and improving our operational performance. The coronavirus pandemic has acted as an accelerator in this process.

How do you equip companies to deal with this?

Schmidt —

In the INDUS Group, we have benefited from the agility of our SME portfolio companies once again in an extremely difficult period. The high level of individual responsibility that the companies take on is key here. The managing directors and their workforce quickly rose to these challenges and found pragmatic solutions that ensured the highest level of safety for all staff – while keeping company operations running as smoothly and undisturbed as possible. At the holding company, we supported the portfolio companies’ development by encouraging operational excellence and innovation. By securing financing for the Group we created the foundation for companies to continue to grow during the crisis.

Has the profile of your target companies also changed?

Schmidt —

When it comes to the acquisition of new companies, we had already identified the growth industries we want to expand into as part of our PARKOUR strategy program. The branches of automation, measuring technology and control engineering, construction technology, safety technology, technology for infrastructure and logistics, and energy and environmental technology have not become any less attractive or relevant as a result of the coronavirus pandemic. The acquisition of Jungmann Systemtechnik GmbH & Co. KG, which we secured in 2020, fits in with this strategy perfectly. JST is one of the leading suppliers of control room solutions such as production control centers for industry, control rooms for energy and water management, IT control rooms for data centers, and safety and traffic control centers. This acquisition boosts the automation, measuring technology and control engineering growth industry in our portfolio.

If the markets keep changing as rapidly as they are today, won’t the risk profile increase for purchasing?

Schmidt —

It doesn’t necessarily have to be that way. The coronavirus pandemic has put business models to the test under real conditions. The pandemic has mercilessly exposed the weaknesses, but also the strengths of the business models. This makes it possible to accurately assess the risk profile of target companies in the M&A process. Of course, there is still uncertainty about macroeconomic development and the question of when the pandemic will be overcome. But, companies that are able to come through the pandemic well will be able to seize the opportunities available to them as the economy starts to recover.

What part does sustainability have to play in your investment decisions?

Schmidt —

At INDUS we started addressing the topic of sustainability seriously early on. The DNA of our “buy, hold & develop” business model is inherently sustainable. We incorporated the assessment of target companies’ sustainability performance into the due diligence of our M&A process years ago. We have also been adhering to the ISS ESG (formerly oekom) rating since 2015, which meant we were able to issue an ESG-linked promissory note for the first time in 2020. In this year’s planning process, we have dedicated an entire chapter to the topic of sustainability. In this chapter, the individual portfolio companies show the concrete measures they have implemented to enhance their sustainability strategies. At the holding company, we are continuing to actively support our portfolio companies’ sustainability projects. We have adapted our successful innovation development bank model to create a sustainability development bank. This sustainability development bank will support projects that further improve the sustainability performance of our portfolio companies.

The INDUS strategy is to “buy, hold & develop.” Will this remain the strategy in the future?

Schmidt —

It is this Board of Management’s firm belief that the “buy, hold & develop” strategy represents a solid foundation for the success of the INDUS Group now and in the future. The sale of companies will also continue to be the exception, not the rule. We continue to commit our full attention to supporting our existing portfolio companies in their operational excellence and innovation. And with our M&A strategy, we are continuing to pursue the development of the Group in the sectors we have identified as growth industries. This means we can continue to offer our stakeholders an exciting comprehensive package.

[IN]side Introducing INDUS projects