Strong net collections from recent acquisitions

Comment by the CEO
Following the largest transaction in DDM’s history at the end of 2015, the first quarter of 2016 has involved significant work on the implementation of the Lombard transaction ahead of the closing, which took place at the end of April 2016 after receiving the approval from the Hungarian National Bank.  

During the quarter we have also continued to deliver on our investment strategy in CEE with the acquisition of a new portfolio in the Czech Republic. This was the second portfolio we have acquired from the seller, confirming our transaction capabilities and DDM as a reputable buyer. This was largely funded by additional debt financing of EUR 4M in the quarter which was secured to fund the portfolio acquisition.

As a result of the recent acquisitions, net collections in the first quarter of 2016 increased by 39% compared to the first quarter of 2015, while amortization increased by 66%. Due to our ongoing efforts on operational excellence, operating expenses decreased compared to the corresponding quarter in the prior year and were in line with guidance, contributing to the improvement of 60% in cash EBITDA (net collections less operating expenses) in the first quarter of 2016.

Gross ERC (Estimated Remaining Collections) increased by 11% at the end of the first quarter of 2016 as compared to the same period in 2015, due to the recent acquisitions. Compared to the fourth quarter of 2015 ERC has decreased by 2% due to collections and amortization on the portfolios.

Cash flow from operating activities before working capital changes for the first quarter of 2016 was EUR 4.4M, compared to EUR 2.3M for the first quarter of 2015. Following the closing of the recent Hungarian transaction at the end of April, we received the first cash flows from collections in early May. This acquisition will contribute to stronger operational cash flows during 2016.

Market outlook
The pipeline of portfolios for sale across our region continues to increase significantly and outpace industry growth in Europe as a whole. DDM is seeing a sharp increase in the number of invites to bid for large portfolios and we are well placed to continue the rapid expansion in our investment activities. We remain positive on the outlook for DDM, as we are currently in advanced stages on several significant transactions.

Given the large amount of investment opportunities, funding is a key focus. We aim to raise additional funding, both equity and debt, targeting a long-term and sustainable capital structure and costs. With the improved financial position due to the recent acquisitions, we feel confident that we will be able to continue to deliver according to our strategy.

The information in this Interim Report requires DDM to publish the information in accordance with the Securities Market Act and/or the Act on Trading in Financial Instruments. The information was submitted for publication 12 May 2016 at 8:00 a.m. CET.