31 Jul 2018

DDM Debt AB: Q2 and half year report January - June 2018

Significant increase of collections from portfolios

Highlights second quarter 2018

• Net collections increased by 57% to EUR 15.4M (Q2 2017: EUR 9.8M)
• Cash EBITDA increased by 67% to EUR 13.7M (Q2 2017: EUR 8.2M)
• Net profit for the period of EUR 0.6M (Q2 2017: loss of EUR 0.0M)
• Investments in the Czech Republic and the Balkans totaling approximately EUR 6M

Highlights six months 2018  

• Net collections increased by 64% to EUR 25.9M (H1 2017: EUR 15.8M)
• Cash EBITDA increased by 72% to EUR 22.5M (H1 2017: EUR 13.1M)
• Net profit for the period of EUR 1.5M (H1 2017: profit of EUR 0.5M)
• 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 of the DDM Group, 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 57% compared to Q2 2017, and by 64% 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, with the growth year-on-year in H1 also due to the acquisition of DDM Treasury’s subsidiaries holding the NPL portfolios on 17 February 2017. 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.

Cash EBITDA amounted to EUR 13.7M in the second quarter and EUR 22.5M for H1 2018, increases of 67% and 72% compared to the corresponding period in 2017, driven by the higher net collections.  The net result was a profit of EUR 0.6M for Q2 2018 compared to a small loss 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 0.7M, mainly on the Czech and Hungarian portfolios. The net result for H1 2018 was a profit of EUR 1.5M, compared to a profit of EUR 0.5M in H1 2017.

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 8.1M in Q2 2017, and EUR 16.3M in H1 2018 compared to EUR 12.6M in H1 2017, despite a significant increase in interest paid in 2018 compared to the prior year.

Market outlook

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 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 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.

Financial calendar

DDM Debt AB (publ) 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 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 31 July 2018 at 08:00 CET.