Q3 and YTD report January – September 2019

Significant acquisitions in core markets support growth

Highlights third quarter 2019

• Net collections amounted to EUR 15.8M (16.6)
• Cash EBITDA amounted to EUR 13.6M (15.0)
• Net loss for the period of EUR 1.2M (profit of 0.3)
• Investment in a significant portfolio in Croatia finalized with a gross collection value (face value) of c. EUR 200M
• Buy-out of co-investor in Greece
• Financing finalized for part of the joint venture with B2Holding, at a lower cost of borrowing than the existing senior secured bond framework
• Equity injection of about EUR 4.5M from DDM Finance AB
• Strengthened management team with Chief Operating Officer to further increase focus on portfolio management, business development and servicing of third-party portfolios

Highlights nine months 2019

• Net collections increased by 12% to EUR 47.5M (42.5)
• Cash EBITDA increased by 8% to EUR 40.6M (37.5)
• Net loss for the period of EUR 3.9M (profit of 1.9)
• Investment in a significant corporate secured portfolio in Croatia made through a 50/50 joint venture with B2Holding
• Secured super senior RCF of EUR 27M significantly lowering the cost of funding, EUR 17M undrawn at 30 September
• Successful refinancing issuing a new EUR 100M senior secured bond with a three-year term replacing the existing EUR 85M bond, priced at Euribor plus a margin of 925 basis points
• Sale of portfolios in Russia resulted in EUR 2M operating gain

Comment by the CEO

As part of DDM’s strategic growth plan as a specialized investor in non-performing loans (“NPL”), we have acquired significant portfolios of approximately EUR 100M across our core markets in the first nine months of 2019. In addition, we have also continued to successfully refinance our existing debt structure to improve flexibility, extending the maturity of our existing financing, which in combination with strong collections will support our future growth.

Significant acquisitions in core markets

During the third quarter we secured third party financing together with B2Holding to partially fund the joint venture acquisition in Croatia acquired in the second quarter. The financing within the joint venture structure is at a lower cost of borrowing than the existing senior secured bond frameworks. This not only confirmed the portfolio quality but also enabled DDM to invest the proceeds in further acquisitions.

Furthermore, we bought out the co-investor in our Greek non-performing loan portfolio which was acquired by DDM in August 2017. The total investment amounted to approximately EUR 20M. In September, we also finalized the acquisition of a significant distressed asset portfolio in Croatia with a gross collection value (face value) of about EUR 200M.

These acquisitions have significantly increased the book value of investments by 59% compared to 31 December 2018 to EUR 185M. Also the proportion of secured portfolios has also increased from 61% of ERC at 31 December 2018 to 73% of ERC at 30 September 2019, with the majority of collections expected to be received in the next three years.

Newly appointed COO increases focus on portfolio management

Our servicing platform in partnership with the company 720 Restructuring & Advisory and lead by Bernhard Engel, our newly appointed COO, will increase DDM’s focus on portfolio management and business development services. This complements our existing network of outsourced debt collection agencies and work out specialists as well as enabling us to be closer to the market. It will also ensure increased control and management by partially servicing DDM’s own secured portfolios, whilst gradually providing third party work out servicing and adjacent professional services. Our servicing platform will build further value to our shareholders by actively networking with vendors and work out specialists to further identify profitable business opportunities to invest across the NPL market. Initially there will be a period of development to build the servicing platform, in order to generate third party revenues from work outs, increasing the scalability of our existing operations.

Continued refinancing of debt structure supports future growth

We continue to successfully refinance our debt structure to support our future growth, improving flexibility and extending the maturity of our existing financing. 

During the third quarter DDM Debt’s parent company, DDM Finance AB issued EUR 6M of bonds gross of financing costs. Part of the net proceeds were used to provide a shareholder loan to DDM Debt, which thereby qualifies as equity under the current DDM Debt senior secured bond and revolving loan facility (“RCF”) terms. This strengthens the opportunities for DDM Debt to support continued growth.

The headroom under the EUR 27M RCF was EUR 17M at 30 September and is available until March 2021 and cash on hand was approximately EUR 8M at the end of September 2019.

Market outlook

We aim to deliver sizeable and profitable growth as we continue to focus on our core markets across Southern, Central and Eastern Europe where we have strong market knowledge and relationships.

As part of the outlook we target to increase ERC, as we seek to invest in future acquisitions. The majority of collections are expected to be received in the next three years following the recent acquisitions in Croatia and Greece. DDM’s rate of growth and financial results will continue to vary from quarter to quarter, as we invest further in portfolios that are impacted by the timing of investments and larger settlements.

Having a strong investment track record and directly owning local servicing capabilities for secured portfolios in our core markets, DDM is uniquely positioned to capitalize on economic growth. Our core markets have shown macro-economic growth over recent years and we expect continued positive market environments supporting our development and growth going forward.

Stockholm, 7 November 2019

DDM Debt AB (publ)

Henrik Wennerholm, CEO
 

Financial calendar

DDM Debt AB (publ) intends to publish financial information on the following dates:

Q4 and full year report 2019:          20 February 2020

Annual report 2019:                          27 March 2020

Other financial information from DDM is available on DDM’s website, www.ddm-group.ch.

This report has not been reviewed by the Company’s auditors.

Presentation of the report

The report and presentation material are available at www.ddm-group.ch on 7 November 2019, at 08:00 CET.

CEO Henrik Wennerholm and CFO Fredrik Olsson will comment on the DDM Group’s results during a conference call on 7 November 2019, 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 8 505 583 69, CH: +41 225 805 977 or UK: +44 333 300 9035.

For more information, please visit DDM’s website at www.ddm-group.ch or contact:

Henrik Wennerholm, Chief Executive Officer

Tel: +41 79 539 88 59

Fredrik Olsson, Chief Financial Officer

Tel: +41 79 331 30 17

Mail: investor@ddm-group.ch

This is information that DDM Debt AB is obliged to publish in accordance with the EU Market Abuse Regulation and the Securities Market Act. The information was submitted for publication, through the contact person set out above, on 7 November 2019 at 08:00 CET.

DDM Debt AB (publ) (Nasdaq Stockholm: DDM2) is a wholly owned subsidiary of DDM Holding AG. DDM Holding AG (Nasdaq First North Growth Market, 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, and has acquired 2.3 million receivables with a nominal value of over EUR 4 billion. Arctic Securities is DDM Holding AG’s Certified Adviser (tel: +46 8 44686080, e-mail: certifiedadviser@arctic.com).