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DDM Holding AG
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DDM Debt AB
DDM Holding AG: Q1 2018 report
Significant investment in the Balkans and RCF extended
Highlights first quarter 2018
- Significant investment in the Balkans of about EUR 30M, with an additional investment of about EUR 10M pending regulatory approval expected in the coming months
- Super senior revolving credit facility of EUR 17M extended for a further six months until 28 September
- Kent Hansson, founder and Chairman of the Board of Directors became acting CEO from 5 February
- New Chief Investment Officer, Alessandro Pappalardo, appointed as a member of the Executive Management Committee
- Gross ERC at the end of March 2018 was EUR 279M, a significant increase of 240% (Q1 2017: EUR 82M)
- Net collections increased by 31% to EUR 10.7M (Q1 2017 EUR 8.1M)
- Cash EBITDA increased by 24% and amounted to EUR 8.6M (Q1 2017: EUR 7.0M)
- Net profit for the period of EUR 1.0M (Q1 2017: loss of EUR 2.5M)
Significant events after the end of the quarter
- New Head of Business Development, Henrik Wennerholm, appointed as a member of the Executive Management Committee
Comment by the CEO
In the first quarter of 2018 we built on the positive momentum from 2017, and continued our rapid expansion. In March we invested about EUR 30M in a significant portfolio containing secured corporate receivables in the Balkans. About 90% of the portfolio value is located in Slovenia and Croatia, and this transaction also includes receivables in Bosnia & Herzegovina and Montenegro, among others. Entering these markets delivers on our growth strategy and demonstrates our flexibility and solid industry experience. As a result of this transaction our Estimated Remaining Collections (ERC) increased by 12% compared to 31 December 2017. This transaction also rebalanced the composition of DDM’s portfolio, resulting in Croatia being our largest market at the end of March, amounting to 29% of our overall book value of distressed asset portfolios, followed by Greece and Slovenia representing 28% and 19% respectively. An additional investment of about EUR 10M in the Balkans portfolio is pending regulatory approval, which is expected in the coming months.
During the quarter we also strengthened the management team, with Alessandro Pappalardo appointed as Chief Investment Officer and a member of DDM’s Executive Management Committee in February. Mr. Pappalardo has extensive industry experience, including from Goldman Sachs as well as Intrum Justitia, where he served as Chief Investment Officer on the Group Management Team. Kent Hansson, founder and Chairman of the Board of Directors also assumed the position of acting CEO from 5 February. After the end of the quarter, Henrik Wennerholm was appointed as Head of Business Development and a member of DDM’s Executive Management Committee. Mr. Wennerholm also has extensive industry experience from companies such as Hoist, Aktiv Kapital (PRA Group) and, most recently, B2Holding ASA where he served as Head of Business Development and a member of the Group Executive Management Team. He was also the founding partner and CEO of the Nordic NPL investor and debt recovery specialist Sileo Kapital AB, which was acquired by B2Holding ASA in 2014. The management team is expected to be further strengthened in the coming quarters.
Net collections increased by 31% in Q1 2018 compared to Q1 2017. Revenue from management fees were EUR 0.2M in the quarter. The higher net collections resulted in cash EBITDA for the first quarter of EUR 8.6M, an increase of 24% compared to Q1 2017. The net result was a profit of EUR 1.0M for Q1 2018 compared to a loss of EUR 2.5M in Q1 2017 (profit of EUR 0.6M in Q1 2017 excluding non-recurring items related to the refinancing).
In March we extended our revolving credit facility of EUR 17M with a Swedish bank for a further six months until 28 September. Funding of the business will continue to be a focus area going forward to further improve flexibility, decrease the cost of capital and support our rapid growth.
Our strong operational performance resulted in cash flow from operating activities before working capital changes of EUR 4.5M in the first quarter compared to EUR 3.2M in Q1 2017.
Regulatory, accounting and market pressures will continue to drive banks and financial institutions around Europe to improve their balance sheets through disposing of their non-performing assets. We therefore expect our strong profitable growth to continue, as we believe that there will continue to be plenty of good business opportunities for DDM.
However, DDM’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.
In 2018our target is to double our investments compared to 2017 by investing more than EUR 165M and we anticipate operating expenses of EUR 8M. 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 intends to publish financial information on the following dates:
Annual General Meeting: 23 May 2018
Interim report for January – June 2018: 31 July 2018
Interim report for January – September 2018: 8 November 2018
Q4 and full year report 2018: February 2019
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 3 May 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 8 503 365 64, CH: +41 225 675 548 or UK: +44 203 008 9803.
The information in this interim report requires DDM Holding AG to publish the information in accordance with the EU Market Abuse Regulation and the Securities Market Act. The information was submitted for publication on 3 May 2018 at 08:00 CET.