DDM Holding AG Q3 and YTD report January - September 2017
Significant increase in ERC and new revolving credit facility supporting continued rapid expansion
Highlights third quarter 2017
Entered Greece, investing EUR 50M
Further portfolio acquired in the Czech Republic for approximately EUR 12M
Significantly increased investment guidance by 140% to EUR 120M for 2017
Super senior revolving credit facility of EUR 17M successfully secured, continuing to lower the cost of funding
Gross ERC at the end of September 2017 was EUR 255M, a significant increase of 183% (Q3 2016: EUR 90M)*
Net collections decreased by 37% to EUR 6.6M (Q3 2016: EUR 10.4M)
Cash EBITDA decreased by 45% and amounted to EUR 5.1M (Q3 2016: EUR 9.3M)
Net profit for the period of EUR 0.7M (Q3 2016: profit of EUR 3.9M)
Highlights nine months 2017
- Investments in Greece, Croatia, the Czech Republic and Slovenia, totaling approximately EUR 96M
Net collections increased by 4% to EUR 24.7M (9M 2016: EUR 23.8M)
Cash EBITDA increased by 3% and amounted to EUR 21.1M (9M 2016: EUR 20.5M)
Adjusted net profit of EUR 2.0M, excluding non-recurring items related to the refinancing in Q1 2017
Net loss for the period of EUR 1.1M (9M 2016: profit of EUR 3.5M) due to non-recurring items totaling approximately EUR 3.1M related to the refinancing
EUR 85M of senior secured bonds at 9.5% issued and listed on Nasdaq Stockholm
Fully subscribed share issue with pre-emptive subscription rights for existing shareholders of approximately EUR 11M before issuance costs
Significant events after the third quarter
- The second Croatian acquisition was finalized, following regulatory approval
* Gross ERC at 30 September 2017 does not include the second transaction in Croatia
Comment by the CEO
I am very happy to have been appointed as the CEO of DDM in September and to have been given the opportunity to contribute to the continued success of the company together with the rest of the DDM team. The Company has grown and developed at a fast pace over the last few years and is in an extremely expansive phase, which is shown by our Estimated Remaining Collections (ERC) more than tripling in size since the beginning of this year.
DDM made a number of significant transactions in the quarter, including our first transaction in Greece which completed in early August, establishing a first mover advantage in the country with the highest non-performing loan ratio in Europe. The sizeable portfolio, representing 48% of the total portfolio at the end of the third quarter, is in the process of being on-boarded and the workout has been initiated. The EUR 50M investment not only contributes significantly to DDM’s growth but also offers strong potential for further transactions in Greece.
The Company also acquired a portfolio in the Czech Republic in the quarter for approximately EUR 12M. The portfolio was purchased from a seller we have previously acquired portfolios from, confirming DDM’s reputation as a preferred buyer. Shortly after the end of the third quarter DDM finalized its second Croatian transaction, the previously announced acquisition of a distressed asset portfolio containing secured corporate receivables.
The investments in 2017 total EUR 96M to date, which combined with a continued strong pipeline of portfolios, means we are on track to achieve our revised investment target for 2017 of EUR 120M.
The investments year to date have been funded by cash on hand, following the debt and equity financing activities in the first half of the year, cash flow from operations and the recently announced new super senior revolving credit facility of EUR 17M which was successfully secured at the end of the third quarter. The RCF is another important step in diversifying our funding and continuing to lower our funding cost. We also continue to work actively on the capital structure to match the increased investment target for 2017.
As the recently acquired large portfolios have not yet started to contribute significantly and the prior year benefitted from the large Slovenian acquisition in the quarter, net collections for Q3 2017 decreased by 37% compared to Q3 2016. Net collections increased by 4% for the first nine months of 2017 compared to the same period last year, driven by strong performance YTD from the larger Hungarian portfolio and the larger Slovenian acquisition.
Cash EBITDA for the third quarter amounted to EUR 5.1M, a decrease of 45% compared to the same period in 2016, mainly due to the lower net collections. For the first nine months of 2017 cash EBITDA was EUR 21.1M, 3% higher than the first nine months of 2016. The net result was a profit of EUR 0.7M for the third quarter and a profit of EUR 2.0M for the first nine months of 2017, on an adjusted basis, excluding non-recurring items totaling approximately EUR 3.1M related to the bond refinancing in Q1 2017.
Financial expenses were EUR 2.2M in the third quarter and EUR 9.1M for the first nine months of 2017. The bond refinancing in Q1 2017 resulted in total negative non-recurring items of approximately EUR 3.1M in the quarter due to the non-cash write off of about EUR 1.9M for the remaining transaction costs on the old bonds, in addition to the call premium of approximately EUR 1.2M for the SEK 300M bond. The refinancing resulted in a significantly lower interest rate and an improved cost of funding that the company benefits from.
Gross ERC at the end of the third quarter of 2017 was EUR 255M, a substantial increase of 183% compared to the same period in 2016, as the significant recent acquisitions more than offset amortization, revaluation and impairment on existing portfolios in the past 12 months.
Cash flow from operating activities before working capital changes was EUR 0.6M in the third quarter compared to EUR 6.0M in Q3 2016, due to the lower net collections and higher interest paid in the quarter compared to the prior year. For the first nine months of 2017, cash flow from operating activities before working capital changes was EUR 12.8M compared to EUR 13.2M for the same period last year, due to the negative impact from the aforementioned call premium of EUR 1.2M.
DDM has had strong profitable growth over the past two years, and we expect this trend to continue. However, the Group’s rate of growth and financial results will continue to vary from quarter to quarter, impacted by the timing of significant acquisitions. Today DDM primarily targets larger portfolio acquisitions and they generally take longer to complete, potentially resulting in positive one-off effects during the quarter the portfolio is acquired.
We continue to see a very strong pipeline of portfolios across our region in both existing and new markets, and a number of sizeable transactions are expected to close before year end. We will continue our rapid expansion as we continue to source attractive portfolios given our proven transaction closing capabilities and strong reputation. We remain positive on the outlook for DDM and feel confident to be able to continue to grow the DDM Group.
DDM intends to publish financial information on the following dates:
Q4 and full-year report for January – December 2017: 28 February 2018
Annual report 2017: 29 March 2018
This report has not been reviewed by the Company’s auditors.
CEO Andreas Tuczka and CFO Fredrik Olsson will comment on the DDM Group’s results during a conference call on 2 November 2017, 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 96, CH: +41 225 675 548 or UK: +44 203 008 9802.
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 2 November 2017 at 08:00 CET.
For more information, please visit DDM’s website at www.ddm-group.ch or contact:
Mats Hedberg, Investor Relations Manager
Mail: firstname.lastname@example.org | Tel: +46 70 730 81 27
DDM Holding AG (Nasdaq First North, Stockholm: DDM) is a multinational investor in and manager of distressed assets. Since 2007, the DDM Group has built a successful platform in Southern, Central and Eastern Europe, currently managing 2.3 million receivables with a nominal value of over EUR 3.5 billion. DDM Debt AB (publ) (Nasdaq Stockholm: DDM2) is a wholly owned subsidiary of DDM Holding AG. Erik Penser Bank is DDM Holding AG’s Certified Adviser.