Investors presentation H1 2019 Results August 29, 2019 1 - - PowerPoint PPT Presentation

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Investors presentation H1 2019 Results August 29, 2019 1 - - PowerPoint PPT Presentation

Investors presentation H1 2019 Results August 29, 2019 1 Disclaimer This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and the securities laws of other


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August 29, 2019

Investors presentation H1 2019 Results

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Disclaimer

2 This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and the securities laws of other jurisdictions. In some cases, these forward-looking statements can be identified by the use of forward-looking terminology, including the words "believes", "estimates", "aims", "targets", "anticipates", "expects", "intends", "plans", "continues", "ongoing", "potential", "product", "projects", "guidance", "seeks", "may", "will", "could", "would", "should" or, in each case, their negative, or other variations or comparable terminology or by discussions of strategies, plans, objectives, targets, goals, future events or intentions. These forward-looking statements include matters that are not historical facts. They appear in a number of places throughout this presentation and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, competition in areas of our business, outlook and growth prospects, strategies and the industry in which we operate. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend

  • n circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future

performance and that our actual results of operations, financial condition and liquidity and the development of the industry in which we

  • perate may differ materially from those made in or suggested by the forward-looking statements contained in this presentation. In

addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this presentation, those results or developments may not be indicative of results

  • r developments in subsequent periods. For a description of important factors that could cause those material differences, we direct you to

the section of our Annual Report entitled "Risk Factors". Any forward-looking statements in this presentation are based on plans, estimates and projections as they are currently available to our

  • management. We undertake no obligation, and do not expect, to publicly update or publicly revise any forward-looking statement,

whether as a result of new information, future events or otherwise. Although we believe that the expectations reflected in such forward- looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. All subsequent written and

  • ral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the

cautionary statements referred to above and contained elsewhere in this presentation and in our Annual Report. Unless otherwise indicated, the financial information presented herein as of and for the half ended June 30, 2019 includes the impact of the DSO and the Serfin acquisitions and excludes the impact of the Sistemia acquisition. For periods prior to January 1, 2019, figures are presented on a pro forma combined basis for MCS, DSO and Serfin. Prior to their respective acquisitions, the consolidated financial statements of DSO and Serfin were prepared in accordance with French GAAP and Italian GAAP, respectively.

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Positive quarterly growth on Cash Revenues (+2%) and Cash EBITDA (+7%) in Q2 2019 (vs Q1 2019)

We ended H1 2019 with a strong performance on a per portfolio basis with over performance of our due-diligence expectations

  • Stable Gross collections (only -1% decrease in Q2 vs Q1 2019) as the logical consequence of low investments in 2018 (-5% / -€5.8m LTM) being offset by
  • ur strong investment level in H1 2019
  • Strong momentum in Servicing (+5% / +€1.1m increase in Q2 vs Q1 2019)
  • The group’s revenues profile remains well balanced, with 56% of the group’s revenues stemming from recurring, capital light servicing activities

LTM Cash EBITDA slightly below 2018 levels, as expected post lower portfolio acquisitions in 2018

The resulting LTM Cash EBITDA stands at €94 million, 5% below LTM June 2018 and growth momemtum is expected to be driven by:

  • Stronger debt purchasing volumes since the beginning of 2019 (€25 million during H1 2019 only; +€9 million versus H1 2018) with new transactions

already signed early in Q3 2019

  • 85% of our synergies plan have been secured in H1 2019, of which €0.4 million of gain have flowed in our P&L to date

As a reference, it is worth noting that the LTM H1 2019 Cash EBITDA margin remains stable at 45% (vs. 46% H1 2018)

Our commercial dynamics are gathering pace in France and Italy

  • In France, new servicing mandates and debt purchasing transactions were signed, proving a robust French market. Our pipeline at its highest ever
  • In Italy, completion of our acquisition of Sistemia S.p.A. on July 10, 2019, a debt servicer with strong real-estate expertise, generating €26 million in

revenue and €8.6 million in EBITDA in 2018

  • The combination of Serfin and Sistemia allows us to cover a full spectrum of debt collection services in Italy for the benefit of a wide range of

customers

We continue to operate with moderate leverage levels and significant liquidity

  • Leverage ratio at 3.1x(1) within previous guidance of 2.5 – 3.5x
  • Significant liquidity, with €86m of cash and €50m of undrawn RCF, readily available to seize attractive investment opportunities

(1) Net debt / Cash EBITDA ratio for MCS&DSO including Serfin combination and

synergies realization and excluding the recent Sistemia acquisition

Key Highlights of H1 2019 results

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28.7 28.5 22.6 23.7

Q1 2019 Q2 2019

Gross collections Servicing revenues

(€m)

51.3 52.2 21.2 22.6

Q1 2019 Q2 2019

Cash EBITDA Cash EBITDA margin

41% 43% (€m)

30.1 29.6

Q1 2019 Q2 2019

(€m)

4

+7%

KEY HIGHLIGHTS

  • Compared to Q1, Collections stability (only -1% decrease) results mainly from the impact of our

limited 2018 acquisition volumes on our backbook collections being partly compensated by vintage 2019 collections. Performance on a per portfolio basis remains strong with over performance of our due-diligence expectations

  • In parallel, solid performance on Servicing for Q2 2019 (+5%) resulting from increased business

with both existing and new clients where we have won competitive tenders

  • The group’s revenues profile remains well balanced, with 56% of the group’s revenues

stemming from recurring, capital light activities (vs. 52% in Q1 2019)

  • We believe this Cash EBITDA growth will prove to be consistent thanks to both our synergies

plan and our stronger debt purchasing (already in H1 along with new transactions signed early in Q3 2019).

Total Cash revenues Cash EBITDA & Cash EBITDA Margin

Positive quarterly growth on Cash Revenues and Cash EBITDA

MCS&DSO P&L including Serfin

Total costs

  • 2%
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59.0 59.6

H1 2018 H1 2019

(€m)

45.9 43.8

H1 2018 H1 2019

Cash EBITDA Cash EBITDA margin

44% 42% (€m)

59.1 57.2 45.8 46.3

H1 2018 H1 2019

Gross collections Servicing revenues

(€m)

104.9 103.5

5

  • 5%

KEY HIGHLIGHTS

  • Compared to H1 2018, H1 2019 Collections decrease by 3% mainly impacted by our limited

2018 acquisition volumes on backbook collections

  • Growth momentum is expected to be driven by both our dynamic investment strategy and our

synergies plan as presented on the three next slides

  • In parallel, slighlty increasing performance on Servicing for H1 2019 (+1%) resulting from

increased business with both existing and new clients where we have won competitive tenders

Total Cash revenues Cash EBITDA & Cash EBITDA Margin

H1 is slightly below 2018 levels but with growth momentum

MCS&DSO P&L including Serfin

Total costs

+1%

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KEY HIGHLIGHTS

We face a servicing growth momentum mainly driven by:

  • In France, solid performance of our existing clients contracts and competitive tenders generated additional business of

€1.5m over the semester. This offsets the declining contribution of CIF contract

  • In Italy, we are gaining new mandates thanks to joint commercial efforts between our Italian and French teams

Servicing revenues per quarter1

Strong momentum in Servicing

+58% 14.0 13.6 13.5 14.1 14.2 15.5 15.1 16.3 15.3 15.8 2.1 4.9 5.1 6.2 5.6 5.1 4.8 5.4 4.4 4.4 2.7 2.7 2.6 2.6 2.6 2.7 2.9 3.2 2.8 3.5 18.7 21.2 21.1 22.9 22.4 23.4 22.7 24.9 22.6 23.7

Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 DSO MCS Serfin Total

1 Before Q1 19, all the figures are consolidated on a pro-forma view

7%

CAGR LTM Jun. 19 vs Dec.17

2% 5% 5%

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403 383 12/31/2018 06/30/2019

120M Gross ERC

354 345 12/31/2018 06/30/2019

84M Gross ERC 16 25

H1 2018 H1 2019

Portfolio acquisitions

(€m) 7

  • 3%

KEY HIGHLIGHTS

Our commercial dynamics are gathering pace in France and Italy (next slide)

  • Robust level of portfolio acquisitions in H1 2019 with continued strict

investment discipline

  • New transactions already signed early in Q3 2019
  • 120M Gross ERC decreasing as our collections level remains higher on H1

(€57 million) than new portfolio integration ERCs (€39 million)

Portfolio acquisitions 84M & 120M Gross ERC

Dynamic portfolio acquisitions in H1 2019

  • 5%

+58%

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IT Offshoring & others Overheads, purchasing &

  • ffice spaces

Total cost synergies Collections Total synergies

Synergies per category

Target

8

(€m)

Synergies: Integration workstreams and synergies realizations well on track

1.6 1.1 1.0 3.7 1.0 4.7

KEY HIGHLIGHTS

  • Our 2020 objective was to realize €3.7 million of cost synergies and €1.0 million of revenue synergies and we see great progress on this plan

since 85% have been secured to date. Note that only €0.6m of gains have flowed in our P&L in H1 2019 (of which €0.4m in Q2), since the plan’s full impact is expected to be crystallized gradually.

  • On costs, 13 integration workstreams on which 6 have already started to deliver savings
  • Main achievement: regroupment of Paris headquarters teams in a common location in June
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Completion of the acquisition of Sistemia on July 10, 2019 MCS&DSO extends its offer in Italy

KEY HIGHLIGHTS

  • One of the most attractive European markets in

terms of NPL

  • Strong business connection between France and

Italy, with significant cross-border presence of large corporates

  • Sistemia brings additional strengths to the recent

Italian structure of MCS&DSO Group  Complementary businesses focusing on credit & real estate  Industrialized credit collection and flexible tools  Successful track record of contracts wins and client satisfaction  Strong performance and growth since 2016  Management team with proven track record CAGR (2016/2018) 2016 2017 2018

Servicing accounts (€bn)

4.3 6.5 9.0 45%

% growth 51% 38%

Net revenues (€m)

16.5 20.3 25.7 25%

% growth 23% 27% Operating expenses (€m) (13.1) (15.3) (17.9) 17%

EBITDA (€m)

3.9 5.7 8.6 48%

EBITDA Margin 24% 28% 33% As of and for the year ended December 31

Credit Real Estate Innovative solutions

  • Debt collection
  • Info-providing
  • Portfolio due diligence and

loan analysis

  • Pricing assistance
  • Real estate valuation and

due diligence

  • Asset file management
  • Remarketing of distressed

assets

  • Auction optimisation
  • Information gathering
  • Tax assessment
  • Data integrity
  • Data governance
  • Business intelligence
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3.1x

Leverage on Cash EBITDA

  • incl. synergies

realizations

Jun-19

Capital structure & leverage position – H1 2019

MCS&DSO including Serfin combination and excluding recent Sistemia acquisition

KEY HIGHLIGHTS

We continue to operate with moderate leverage levels and significant liquidity

  • 3.1x leverage ratio, remaining among the lowest in the industry
  • Leverage position consistent with our guidance despite significant

M&A activity (DSO, Serfin)

  • Strong opening liquidity position:

 Our available cash remains high with €86m  Combined with our €50m untapped RCF, this gives us significant firepower to seize attractive investment opportunities

(1) Other loans are referring to DSO (BPI) and Serfin loans (2) Others are referring to profit sharing accruals and EFFICO put for €6.1m (3) Adjusted pro forma Cash EBITDA represents pro forma Cash EBITDA for the twelve months ended June 30, 2019, adjusted to reflect the full-year effect of synergies plan figures to be generated from 2019 from which synergies already materialized have been restated. Total synergies secured end of H1 2019 reached €4.0m (4) 3.1x leverage does not take into account the recent Sistemia acquisition Currency: € m Jun-19 Jun-19 with synergies High Yield Bonds

378.4 378.4

Other loans (1)

5.4 5.4

Co-investors' Debt

1.3 1.3

Others (2)

7.5 7.5

Gross Debt (IFRS)

392.7 392.7

Cash including restricted cash

97.8 97.8

Restricted cash

12.3 12.3

Cash and cash equivalents

85.6 85.6

Net Debt (IFRS)

307.1 307.1

LTM Cash EBITDA (3)

93.5 97.6

Leverage on Cash EBITDA

3.3x 3.1x

Debt Net

(4)

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€36.4m

Net cash flows from operating activities

H1 2019

€86m

Closing cash (1)

Jun-19

KEY HIGHLIGHTS

  • Net cash flows from operating activities increased in line with the growth of our business

(+€36.4m) with seasonal effect on working capital

  • Net cash flows from investment activities impacted by dynamic portfolio acquisitions over

the semester. Portfolio acquisitions end of June 2019 reached €25 million

  • Net cash flows from financing activities evolution mainly due to HY bonds interest expenses

(1) excluding restricted cash

MCS Group consolidated cash flows – H1 2019

€m Jun-19 Net cash flows from operating activities 36.4 Net cash flows for investment activities (30.5) Net cash from financing activities (12.1) Net change in cash and cash equivalents (6.2) Opening cash and cash equivalents 104.0 Closing cash and cash equivalents 97.8

  • /w restricted cash

12.3

For the first 6months ended June 30, 2019

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Appendix

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Highlights

Financial Performance MCS&DSO + Serfin - H1 2019

(1) Pro-forma MCS&DSO including Serfin. (1) (1) (1)

KEY HIGHLIGHTS

  • 1% decrease on total cash

revenues

 -3% decrease of gross collections  +1% increase

  • f

Servicing revenues despite CIF servicing slowdown

  • +1% costs increase

 Professional fees and services increased by €2.4m from comparable period due to 2018 new customers integration costs & Group alignment

  • n

accounting methodology

  • n

legal costs consideration  Personnel costs increased by +4% linked to servicing activity & support staffing growth and staff optimization processes have not yet delivered effective savings  Committed costs decreased by €2.9m including first synergies impacts and including Group accounting methodology alignment (counterparts effect on professional fees and personnel costs)

(2) Committed costs for the first quarter ended March 31, 2018 excluded non-recurring costs related to the setup of MC2S, an SPV owned by the Group that carries out certain of its debt servicing

  • activities. In addition, figures from Q1 2019 include IFRS 16 new impact on lease debts.

(2)

€m 2018 2019 Variation (%) Ended Q2-18 Ended Q2-19 Variation (%) Gross Collections 59.1 57.2

  • 3%

121.6 115.7

  • 5%
  • Attr. Gross Collection

58.5 56.8

  • 3%

119.5 114.6

  • 4%

Non Attr. Gross Collection 0.6 0.5

  • 26%

2.1 1.1

  • 48%

Servicing Revenues 45.8 46.3 1% 89.8 93.8 4% Total Cash Revenues 104.9 103.5

  • 1%

211.4 209.5

  • 1%

Professional fees and services (12.1) (14.5) 20% (24.3) (30.9) 27% Personnel costs (30.7) (31.9) 4% (59.0) (61.7) 5% Committed costs (16.2) (13.3)

  • 18%

(30.1) (23.4)

  • 22%

Total costs (59.0) (59.6) 1% (113.4) (116.0) 2% Cash EBITDA 45.9 43.8

  • 5%

98.0 93.5

  • 5%

Cash distributions to SPV co-investors (0.6) (0.6) 4% (1.5) (1.3)

  • 15%

Attributable Cash EBITDA 45.4 43.2

  • 5%

96.5 92.3

  • 4%

Cash EBITDA Margin 44% 42% 46% 45% For the first 6months ended June 30, 2019 LTM