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20 Aug 2015

DDM Holding AG: Interim report January–June 2015

Highlights second quarter 2015

  • Pipeline remains strong with significant transactions expected to close before year-end, along with additional funding.
  • Senior secured notes were successfully refinanced during the second quarter
  • Net collections during the second quarter increased by 20% to EUR 3.5M (Q2 2014: EUR 2.9M)
  • Cash EBITDA amounted to EUR 2.3M during the second quarter 2015 (Q2 2014: EUR 1.8M)  
  • Gross ERC was EUR 59.7M at the end of June 2015, an increase of 55% (Q2 2014: EUR 38.5M)    
  • Operating expenses trended down during the quarter

Highlights first six months 2015

  • Net collections during the first six months 2015 increased by 61% to EUR 9.2M (H1 2014: EUR 5.7M)
  • Cash EBITDA amounted to EUR 6.4M during the first six months 2015 (H1 2014: EUR 3.5M)

Comment by the CEO
As part of DDM’s strategy to balance our geographic presence, we entered Hungary in the beginning of 2015 by investing in a portfolio and acquiring the Hungarian company Summit Pénzügyi. This was also a significant event as the investment was made in partnership with one of the world’s largest financial institutions. We benefitted from a one-off gain at the time of the acquisition, in Q1 2015, and we were able to recognize net collections of about EUR 1.7M. The Hungarian investment is performing above our expectations. This is an important transaction for DDM as it has led to a number of significant new opportunities across the region.

We successfully refinanced our SEK 300M senior secured notes, with amended terms and conditions to facilitate raising of additional funding for increased investments in the second half of the year. The new structure and terms and conditions is also a step to reduce our cost of funding. The refinancing was successfully completed on 23 June 2015 with resounding support by the bondholders. The amended Terms and Conditions in their entirety are available on our website along with a summary of the amendments.

Net collections in the second quarter of 2015 amounted to EUR 3.5M, an increase of 20% compared to second quarter 2014. For the first six months of 2015, net collections increased by 61% compared to the same period last year.

Gross ERC (Estimated Remaining Collections) increased 55% to EUR 59.7M at the end of the second quarter 2015 compared to Q2 2014.

The Russian investments perform in line with our forecasts, revised at the end of 2014, despite macro-economic challenges. Our performance in several other markets continues to be supportive and the legal collection processes for several investments are expected to become an increasing part of collections during the second half of the year

Cash EBITDA (net collections less operating expenses) increased by EUR 0.5M, to EUR 2.3M, in comparison to the second quarter 2014. Cash EBITDA during the first six months of 2015 amounted to EUR 6.4M, an increase by 82% compared to the same period in 2014. We were negatively impacted by foreign exchange, the absolute majority unrealized, as the RUB weakened during the quarter.

Cash flow from operating activities before working capital changes was EUR 3.9M in the first six months 2015, an increase of 30% compared to the same period in 2014. Investments in distressed asset portfolios amounted to EUR 0.4M, during the second quarter 2015 and EUR 4.6M in the first six month 2015.

As previously communicated, efforts to reduce operational expenses were initiated during the first quarter 2015 and are expected to continue in the coming months.

Market outlook
With strong growth in our pipeline of investment opportunities, we remain optimistic on the outlook of DDM, as we are currently in advanced stages on several significant transactions. These are expected to close before year-end and contribute to a positive financial result for the full year 2015.

Presentation of the interim report
CEO Gustav Hultgren and CFO Fredrik Olsson will comment on the report at a conference call on 20 August 2015, starting at 10:00 a.m. CET. The presentation can be followed live on www.ddm-group.ch and/or by telephone with dial-in numbers: SE: +46 8 566 427 00, CH: toll free 0800 005 203 or UK: +44 203 428 14 08.

Please find attached the full report.