Q4 and Full Year report January – December 2019
Strong growth in invested assets following acquisitions
Highlights fourth quarter 2019
- Net collections amounted to EUR 15.1M (22.2)
- Cash EBITDA amounted to EUR 10.9M (20.5)
- Net loss for the period of EUR 0.8M (profit of 1.2)
- Sale of consumer portfolio previously acquired in Croatia
Highlights full year 2019
- Net collections amounted to EUR 62.6M (64.8)
- Cash EBITDA amounted to EUR 51.5M (58.0)
- Net loss for the period of EUR 4.7M (profit of 3.1)
- Investments in Croatia and Greece, totaling approximately EUR 100M including an acquisition of a significant corporate secured portfolio in Croatia made through a 50/50 joint venture with B2Holding
- 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 5M from DDM Finance AB
- Secured super senior RCF of EUR 27M significantly lowering the cost of funding, undrawn at 31 December
- Successful refinancing issuing a new EUR 100M senior secured bond with a three-year term replacing the existing EUR 85M bond
- Strengthened management team to further increase focus on portfolio management and business development services
- Sale of portfolios in Russia resulted in EUR 2M operating gain
Significant events after the end of the year
On the 18 February 2020 DDM Debt AB initiated a written procedure to request that certain amendments are made to the terms and conditions of its up to EUR 150M senior secured floating rate bonds.
Comment by the CEO
2019 has been a year of transformation for DDM, as we continue to deliver on our strategic growth plan as a specialized investor and manager in secured non-performing loans (“NPL”). In 2019, invested assets have grown by 49% to EUR 173M following portfolio acquisitions of approximately EUR 100M across our core markets. A significant proportion was invested in secured portfolios.
Furthermore, we successfully refinanced our debt structure to improve flexibility, extending the maturity of our existing financing, which in combination with strong collections will support our future growth.
Strong net collections following recent acquisitions in core markets
During the fourth quarter we received adjusted net collections totaling EUR 15.1M, principally from the Balkans and Greece following recent acquisitions. DDM partially sold a portfolio recently acquired in Croatia containing consumer receivables.
Adjusted net collections for the full year 2019 amounted to EUR 62.6M, only slightly lower than record collections for the full year 2018 of EUR 64.8M. Strong collections in 2019 were primarily driven by large, secured collections received in the Balkans including from the joint venture acquired in Croatia together with B2Holding in May and collections in Greece following the buy-out of the co-investor in July. This resulted in adjusted cash EBITDA of EUR 10.9M in the fourth quarter and EUR 51.5M for the full year 2019.
Significant acquisitions in secured portfolios during 2019
We have acquired significant distressed asset portfolios totaling approximately EUR 100M across our core markets during 2019. Also, the proportion of secured portfolios has increased from 61% of ERC at December 2018 to 70% of ERC at December 2019, with the majority of collections expected to be received in the next three years.
Continued refinancing of debt structure supports future growth
In March, we secured a new Revolving Credit Facility (“RCF”) of EUR 27M at a significantly lower cost of funding with an international bank, priced at Euribor plus a margin of 350 basis points. We then successfully refinanced the existing EUR 85M bond by issuing a new EUR 100M bond in April with a three-year term, priced at Euribor plus a margin of 925 basis points. The EUR 27M RCF was undrawn at 31 December and is available until March 2021, and cash on hand was approximately EUR 11M at the end of December.
DDM Debt’s parent company, DDM Finance AB issued EUR 6M of bonds gross of financing costs in 2019. 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.
Development of servicing platform
During the year we launched a servicing platform for secured portfolios to increase the focus on portfolio management and business development services. Bernhard Engel is leading the development of the servicing platform which will increase the focus on portfolio management and business development services, partially servicing DDM’s own secured portfolios and further identifying profitable business opportunities to strengthen our position in the market. The servicing platform was sold in December 2019 to Ax Financial Holding S.A. (“AxFina”) which resulted in a EUR 1.1M gain that was recognized in other operating income.
Market outlook
We aim to deliver sizeable and profitable growth by actively networking with vendors and work out specialists to further identify profitable business opportunities to invest across the NPL market in our core markets across Southern, Central and Eastern Europe.
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.
Whilst the European NPL market is in the process of consolidation, DDM is adapting to new opportunities in the market by both teaming up with co-investors through joint venture acquisitions and seeking out opportunities in new geographies. During 2019 DDM closed a significant acquisition through a 50/50 joint venture with B2Holding of a distressed asset portfolio containing secured corporate receivables in Croatia with a Gross Collection Value (face value) of the total portfolio amounting to approximately EUR 800M. We expect the amount of co-investment opportunities to grow in the future.
Stockholm, 20 February 2020
DDM Debt AB (publ)
Henrik Wennerholm, CEO
Financial calendar
DDM Debt AB (publ) intends to publish financial information on the following dates:
Annual report 2019: 27 March 2020
Interim report for January – March 2020: 7 May 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 20 February 2020, at 08:00 CET.
CEO Henrik Wennerholm and CFO Fredrik Olsson will comment on the DDM Group’s results during a conference call on 20 February 2020, 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 52, CH: +41 225 675 632 or UK: +44 333 300 9260.
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 20 February 2020 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).