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DDM Holding AG
DDM Debt AB
DDM Debt AB: Q4 and full year report January - December 2017
Significant increase in portfolio value and substantial financing raised
Highlights fourth quarter 2017
- Second Croatian investment of EUR 21M finalized, following regulatory approval
- New partner and co-investor in Greece, reducing DDM’s investment by about EUR 15M
- Entered Serbia, investing EUR 2M
- Equity injection of EUR 10M from DDM Finance AB
- EUR 50M of senior secured bonds at 8% issued and listed on Nasdaq Stockholm to support continued strong growth
- Net collections increased by 181% to EUR 12.6M (Q4 2016: EUR 4.5M)
- Cash EBITDA increased by 162% to EUR 10.7M (Q4 2016: EUR 4.1M)
- Net profit for the period of EUR 1.2M (Q4 2016: EUR 0.8M)
- Investments in Greece, Croatia, the Czech Republic, Serbia and Slovenia, totaling approximately EUR 78M
- EUR 85M of senior secured bonds at 9.5% issued and listed on Nasdaq Stockholm
- Super senior revolving credit facility of EUR 17M, continuing to lower the cost of funding
- DDM Debt acquired DDM Treasury Sweden AB’s subsidiaries holding the NPL portfolios on 17 February
- Net collections increased by 261% to EUR 34.9M (2016: EUR 9.7M)
- Cash EBITDA increased by 228% to EUR 28.7M (2016: EUR 8.7M)
- Net profit for the year of EUR 1.4M (2016: profit of EUR 4.2M)
Significant events after the end of the year
- Kent Hansson, founder of the DDM Group and member of the Board of Directors appointed as CEO
Comment by the CEO
The DDM Debt Group continued to deliver on its growth strategy in the fourth quarter. Fueled by our solid industry experience and analytical tools to assess portfolios of non-performing loans (NPL), we continued our rapid expansion. As a result DDM Debt Group’s portfolio carrying value grew to EUR 111M at 31 December 2017, a substantial increase of 608% compared to the same period in 2016. We also entered into new territories as further NPL portfolios were acquired.
During the fourth quarter we finalized our second Croatian transaction, the previously announced acquisition of secured corporate receivables. After significant due diligence work, at the end of November we also entered Serbia. In order to rebalance the composition of the DDM Debt Group’s portfolio, we chose to bring in Ellington Capital Management as a new partner in Greece, decreasing our investment by about EUR 15M. With this transaction, our investment in Greece amounts to about 34% of the DDM Debt Group’s overall book value of distressed asset portfolios.
Net collections grew significantly during Q4 2017, increasing 181% compared to Q4 2016, and by 261% for the full year 2017 compared to 2016. The increase was driven by the significantly higher portfolio value compared to the prior year and collections from the recent investments, in addition to the continued strong performance of the Slovenian portfolio acquired in 2016. Cash EBITDA amounted to EUR 10.7M in the fourth quarter of 2017 and EUR 28.7M for the full year 2017, increases of 162% and 228% respectively compared to the corresponding periods in 2016, driven by the higher net collections.
During 2017 the DDM Debt Group acquired DDM Treasury’s subsidiaries holding the NPL portfolios on 17 February and also made total further investments of EUR 78M in 2017. These investments were both in the DDM Group’s established markets as well as in Greece, Croatia and Serbia, new markets for the DDM Debt Group that have great potential for future transactions and growth, and where we have spent many years evaluating opportunities before entering. These investments display our flexibility and ability to invest in new markets. Furthermore, the transactions diversified our portfolio by increasing our exposure to the corporate receivables segment.
Our solid performance paved the way for DDM to raise capital at a significantly lower cost throughout the year. During the fourth quarter DDM Debt’s parent company, DDM Finance AB, raised EUR 10M in a bridge financing transaction. DDM Finance then provided a shareholder loan of EUR 10M to DDM Debt, which qualifies as equity under the senior secured bond terms. This enabled DDM Debt to issue EUR 50M of senior secured bonds with a final maturity date in December 2020 and a coupon of 8%.
Cash flow continued to improve due to the higher net collections. Cash flow from operating activities before working capital changes was EUR 8.1M in the fourth quarter compared to EUR 4.0M in Q4 2016. For the full year 2017, cash flow from operating activities before working capital changes was EUR 22.0M, a significant increase compared to EUR 7.4M in 2016.
The trend will continue in which banks and financial institutions around Europe need to improve their balance sheets through disposing of their non-performing assets, driven by regulatory, accounting and market pressures. In this environment, we believe that there will continue to be plenty of good business opportunities for the DDM Debt Group.
However, the DDM Debt Group’s rate of growth and financial results will continue to vary from quarter to quarter, impacted by the timing of significant investments. As we primarily target larger portfolios and they generally take longer to complete, this potentially results in positive one-off effects during the quarter the portfolio is acquired.
We aim to deliver sizeable and profitable growth in 2018 as we continue to focus on our markets in SEE and CEE where we have strong market knowledge and relationships.
DDM Debt AB (publ) intends to publish financial information on the following dates:
Annual report 2017: 29 March 2018
Interim report for January – March 2018: 3 May 2018
This report has not been reviewed by the Company’s auditors.
Acting CEO Kent Hansson and CFO Fredrik Olsson will comment on the DDM Group’s results during a conference call on 28 February 2018, starting at 10:00 CET. The presentation can be followed live at www.ddm-group.ch and/or by telephone with dial-in numbers: SE: +46 8 566 193 53, CH: +41 225 675 548 or UK: +44 203 008 9807.
The information in this interim and year-end report requires DDM Debt AB (publ) to publish the information in accordance with the EU Market Abuse Regulation and the Securities Market Act. The information was submitted for publication on 28 February 2018 at 08:00 CET.