Axactor Q2 2018 - Yet another strong quarter with very solid cash-flow
Highlights from the second quarter of 2018
Gross Revenue of EUR 66.7 million (26.9), representing a 148 % y/y growth.
EBITDA of EUR 10.6 million (6.1).
Cash EBITDA of EUR 40.6 million (9.4).
Portfolio investments of EUR 23 million for the quarter, complemented by several significant forward flow contracts across Germany, Italy, Norway and Sweden.
Norway closed an unsecured NPL forward flow contract with Komplett Bank. The contract represents Axactor's largest forward flow contract to date, and will generate an annual investment of approximately EUR 60 million.
Italy entered into 3 new forward flow agreements, including a significant forward flow with a financial institution.
Germany secured a significant forward flow of fresh unsecured consumer claims from large financial institution. The forward flow is expected to generate approximately EUR 46m of outstanding debt across 28,000 cases per annum.
Spain sold more than 1.000 REO units (since first acquisitions in 2017).
Group optimized co-investment structure with Geveran.
Completed reverse share split in the ratio 10:1.
Listed the bonds issued in Q1 2018 on the Oslo Stock Exchange.
Axactor delivered a record high Cash EBITDA of EUR 41m, and an EBITDA of EUR 11m for the second quarter of 2018, compared to a Cash EBITDA of EUR 9 million and an EBITDA of EUR 6 million in the corresponding quarter of 2017. The gross revenue for the quarter ended at EUR 67 million, representing a growth of 148% compared to the same quarter last year.
The second quarter of 2018 was an eventful quarter for Axactor. The company announced several significant new contracts across all markets. In total, forward flow contracts with an estimated total capex of close to EUR 200m was signed in Norway, Germany, Italy and Sweden. In Spain, three new large 3PC contracts in addition to winning a one-off portfolio with Banco Sabadell was achieved.
The forward flow contracts will generate significant volumes from Q3 2018 and onwards, securing future growth for Axactor within the NPL business to consumer segment. As an example, the contract signed with Komplett Bank in Norway is expected to generate an annual capex of approximately EUR 60m when fully operational. The new contracts in Germany and Italy are of considerable size as well. Axactor expects a total monthly investment of at least EUR 15m in forward flow portfolios when all contracts are fully operational from Q3.
The total portfolio investments in the quarter was EUR 23 million, down from EUR 54 million in Q2 2017. The reason for the moderate investment level is partly the focus on securing the large forward flow contracts, and partly due to one-off sales being delayed to the third quarter. The total capex deployment will vary significantly from quarter to quarter. The NPL market in Europe is still strong, and Axactor is focused on selecting the most attractive deals in terms of IRRs and data quality. Creating long term relationships with high quality partners is an important part of the Axactor strategy.
With more than 1,000 REO assets sold to date, the REO portfolio is liquidating faster than expected. The market sentiment in Spanish real estate continues to improve. The combination of reduced unemployment, GDP growth and increased credit giving is positive for both prices achieved on asset sales and the overall turnover. This is confirmed by the company´s positive development in Cash EBITDA.
Although REO is the fastest growing business segment within Axactor, all segments delivered growth in Q2 2018, both compared to the second quarter last year, and compared to the first quarter of 2018. With the new NPL forward flows and Spanish 3PC contracts, the growth across segments is expected to continue.
During the second quarter of 2018, an optimization of the co-investment structure with Geveran has been implemented. After the restructuring, Reolux Holding S.a.r.l. and Luxco Invest I S.à.r.l. are treated as separate stand-alone SPVs within the consolidated group and owned 50/50 by Axactor and Geveran. In parallel with the optimization of the co-investment structure, Axactor is in the final stages of securing a new funding arrangement for the REO portfolio with Nomura International. The agreement is expected to be signed by Reolux end July and to be closed medio August. The transaction is subject to final documentation. The re-financing of the current REO portfolio stock will release approximately EUR 100m in cash, which will be primarily used to repay the internal loan from Axactor AB. The cash released will be made available for Axactor to distribute where the company sees fit. In addition to the release of cash, the new agreement is expected to reduce the funding cost for both existing and future REO portfolios.
We expect high volumes of NPLs to be sold during the next quarters. In the Nordics, forward flow contracts and one-off transactions will contribute to the growth. The REO market in Spain remains strong, and Axactor sees a healthy pipeline for the coming quarters. In addition, the market for secured NPLs is growing rapidly and through good client relationships with key financial institutions, Axactor will be well positioned to take part in this growth in Spain. In Germany and Italy, we see clear signs of improvement in terms of volumes coming to the market which is confirmed by the transactions Axactor has signed and closed over the first weeks of Q3. Axactor expects the positive cash flow development to continue for the 2H 2018 and into 2019.
Oslo, 25 July 2018
For additional information, please contact:
Endre Rangnes, CEO Axactor
Mobile phone: +47 4822 1111
Johnny Tsolis, CFO & Investor Relations, Axactor
Mobile phone: +47 9133 5461
Axactor Group specializes in both Debt Collection and Debt Purchasing across several countries, with operations in Italy, Germany, Norway, Sweden and Spain. The company has a Nordic base and an ambitious Pan-European growth strategy, which targets the market for non-performing loans (NPL) in Europe. This market is estimated to be about 1,500 billion euros across Europe providing significant opportunities for Axactor's future expansion. Axactor has approximately 950 employees.