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DDM Holding AG
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DDM Debt AB
DDM Holding AG: Q2 and half year report January - June 2018
Significant increase of collections from portfolios
Highlights second quarter 2018
- Net collections increased by 55% to EUR 15.5M (Q2 2017: EUR 10.0M)
- Cash EBITDA increased by 53% and amounted to EUR 13.8M (Q2 2017: EUR 9.0M)
- Net profit for the period of EUR 1.0M (Q2 2017: profit of EUR 0.7M)
- Gross ERC at the end of June 2018 was EUR 269M, an increase of 209% (Q2 2017: EUR 87M)
- Investments in the Czech Republic and the Balkans totaling approximately EUR 6M
Highlights six months 2018
- Net collections increased by 45% to EUR 26.2M (H1 2017: EUR 18.1M)
- Cash EBITDA increased by 40% and amounted to EUR 22.4M (H1 2017: EUR 16.0M)
- Net profit for the period of EUR 2.0M (H1 2017: loss of EUR 1.8M)
- Investments in the Balkans and the Czech Republic totaling approximately EUR 36M, with an additional investment in the Balkans of about EUR 8M pending regulatory approval
- Super senior revolving credit facility of EUR 17M extended for a further six months until 28 September
Significant events after the second quarter
- Henrik Wennerholm, previously Head of Business Development, appointed as Chief Executive Officer
Comment by the CEO
I am very happy and proud to have been appointed CEO of DDM and to have been given the opportunity to lead and further develop the company which is in a very interesting phase. The Company has grown and developed significantly during the past two years and I am looking forward to taking the next steps together with the rest of the DDM team, pursuing the many interesting opportunities we have ahead of us.
In the second quarter of 2018 net collections increased significantly, by 55% compared to Q2 2017, and by 45% for H1 2018 compared to the same period last year, driven by collections in Greece, the Czech Republic and from the larger Croatian portfolio acquired in the second half of 2017. The increase was also the result of strong performance in Slovenia and the first collections from the sizeable portfolio in the Balkans acquired in 2018. The composition of our portfolio has changed greatly over the past 12 months, with secured portfolios now making up a much larger share of our overall portfolio of assets, which can cause variability in our collections from quarter to quarter due to larger settlements from corporate portfolios.
During the quarter we continued to work on the handover of the portfolio in the Balkans acquired at the end of the first quarter. The handover is slightly behind schedule and additional measures are being taken to address this and reduce the effects of delayed collections. The quarter was also characterized by intensive work on a number of significant transactions where DDM is in advanced stages of the bidding processes.
We closed two smaller investments in the Czech Republic and the Balkans totaling approximately EUR 6M. An additional investment from Q1 of about EUR 8M in the Balkans portfolio is pending regulatory approval. Funding of the business also remains a focus area and we will continue to work on this going forward to further improve flexibility, decrease the cost of capital and support our rapid growth.
Revenue from management fees were EUR 0.4M in the quarter and EUR 0.7M for H1 2018, compared to EUR 0.7M and EUR 1.0M for the corresponding periods in 2017. Revenue from management fees were higher in 2017 due to the significant collections from Hungary in Q2 2017. Operating expenses were EUR 2.1M in the second quarter and EUR 4.4M for H1 2018, EUR 0.5M and EUR 1.3M higher than for the corresponding periods in 2017, mainly as a result of strengthening the team and as we are bidding for larger acquisitions. The higher net collections were slightly offset by the increased operating expenses, resulting in cash EBITDA for the second quarter of EUR 13.8M and EUR 22.4M for H1 2018, increases of 53% and 40% respectively compared to 2017.
The net result was a profit of EUR 1.0M for Q2 2018 compared to a profit of EUR 0.7M in Q2 2017, despite higher financial expenses as a result of debt issued in Q4 2017 and the negative impact of foreign exchange losses of EUR 0.8M, mainly on the Czech and Hungarian portfolios. The net result for H1 2018 was a profit of EUR 2.0M, compared to a loss of EUR 1.8M in H1 2017 (profit of EUR 1.3M in H1 2017 excluding non-recurring items related to the refinancing).
Our strong operational performance resulted in cash flow from operating activities before working capital changes of EUR 11.4M in the second quarter compared to EUR 9.0M in Q2 2017, and EUR 16.0M in H1 2018 compared to EUR 12.2M in H1 2017.
The sale of non-performing assets is continuing among the banking industry players in the CEE region. As Western European debt sales markets have matured, the focus of investors has turned towards the CEE region and Southern Europe, resulting in an increasing number of distressed asset transactions. Supply of new corporate NPL portfolios in 2018 has been supported by number of large one-off transactions. The most active CEE markets are currently Croatia, Slovenia and Hungary. Although corporate NPLs are still the most actively traded loan portfolios, retail secured NPL portfolios are coming into the forefront due to an increase in economic activity across the region caused by an increase in the purchasing power of consumers, in addition to stable inflationary trend in real estate.
We therefore expect our profitable growth to continue, as we believe that there will continue to be 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 and larger settlements from corporate portfolios. 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.
Annual General Meeting 2018
DDM Holding AG held its Annual General Meeting (“AGM”) on 23 May 2018. All resolutions proposed by the Board of Directors of DDM were approved. The AGM resolved to re-elect Torgny Hellström, Fredrik Waker, Erik Fällström and Mikael Nachemson as members of the Board of Directors. The AGM also resolved to elect Torgny Hellström as Chairman of the Board of Directors. Please see our website www.ddm-group.ch, for further information about the resolutions passed at the AGM.
DDM intends to publish financial information on the following dates:
Interim report for January – September 2018: 8 November 2018
Q4 and full year report 2018: 21 February 2019
Annual report 2018: March 2019
This report has not been reviewed by the Company’s auditors.
CEO Henrik Wennerholm and CFO Fredrik Olsson will comment on the DDM Group’s results during a conference call on 31 July 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 8 566 426 97, CH: +41 225 675 548 or UK: +44 203 008 9807.
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 31 July 2018 at 08:00 CET.