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Q2 2019 presentation 24 July, 2019 Q2 2019 - Key highlights Gross - - PowerPoint PPT Presentation

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Q2 2019 presentation 24 July, 2019 Q2 2019 - Key highlights Gross revenue EBITDA and margin Cash EBITDA ERC (EUR million) (EUR million and %) (EUR million) (EUR million) 100 +37% 1 939 +146% 90 +61% 36% +98% 217 80 70 60 979

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SLIDE 1

Q2 2019 presentation

24 July, 2019

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SLIDE 2

729 1 721 250 217 979 1 939

Q2 2018 Q2 2019 NPL REO

Q2 2019 - Key highlights

2

  • Continued strong margin expansion – more than doubling of EBITDA
  • Earnings before tax of EUR 10 million
  • Strong and profitable growth for the 3PC business
  • Additional EUR 85 million funding released in Q2
  • EUR 149 million invested in NPL Portfolios in Q2

67 91

10 20 30 40 50 60 70 80 90 100

Q2 2018 Q2 2019

11 26 20% 36%

Q2 2018 Q2 2019

Gross revenue

(EUR million)

EBITDA and margin

(EUR million and %)

Cash EBITDA

(EUR million)

ERC

(EUR million)

41 65

Q2 2018 Q2 2019

+37% +146% +61% +98%

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SLIDE 3

17 48 19% 33%

H1 2018 H1 2019

108 182

H1 2018 H1 2019

729 1 721 250 217 979 1 939

H1 2018 H1 2019 NPL REO

First half 2019 - Key highlights

3

  • Significant revenue growth and strong margin increase
  • Earnings before tax of EUR 18 million, up from zero in the first half 2018
  • Book value of NPL portfolios up more than 150% from June 2018
  • Additional EUR 235 million funding released during first half 2019
  • Capex of EUR 218 million invested in NPL portfolios – reiterating the EUR 400-450 million 2019 Capex level

Gross revenue

(EUR million)

EBITDA and margin

(EUR million and %)

Cash EBITDA

(EUR million)

ERC

(EUR million)

59 124

H1 2018 H1 2019

+69% +189% +112% +98%

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SLIDE 4

Attractive market development

  • EUR 149m of NPL Portfolio acquisitions in Q2
  • Attractive opportunities in all Axactor markets –

trading at solid IRRs

  • Forward flow agreements renegotiated on more

favourable terms - or cancelled

  • New forward flow clients expected to come
  • nboard on healthy terms in Q3
  • 3PC market becoming more active – part of

Axactor total value proposition

4

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SLIDE 5

People

Attract and retain high quality employees

Systems Funding

Secure diverse, competitive financing and attractive co-investments

Three key enablers of value creation

Standardize systems across collection platforms - driving low cost base, high efficiency and no legacy

5

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SLIDE 6

67 57 75 91 91 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

Revenue growth and margin improvement

Gross revenue development

(EUR million)

EBITDA and EBITDA-margin

(EUR million and %)

Cash EBITDA

(EUR million)

11 10 20 22 26 20% 21% 29% 30% 36% Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 41 33 45 59 65 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

6

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SLIDE 7

Balancing the geographical footprint

REO portion declining over time

ESP; 31% NOR; 12% DEU; 11% SWE; 7% ITA; 5% FIN; 6% REO; 27%

ESP; 32% NOR; 13% DEU; 12% SWE; 13% ITA; 9% FIN; 10% REO; 11%

Q2-2019 Gross revenue EUR 91.3m Q2-2019 ERC EUR 1,938.5m

7

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SLIDE 8

Year-on-year growth in all areas

Gross revenue development

(EUR million)

  • NPL collection up 60% from Q2’18
  • 3PC up 19% from Q2’18
  • 3PC and ARM combined with effect from Q2’19,

historic figures restated

  • REO sales up 14% from Q2’18

67 57

75 91

91 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 3PC & ARM REO portfolios NPL portfolios

8

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SLIDE 9

NPL port rtfo folio io

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SLIDE 10

NPL – Slight Q2/Q1 decline - growth set to resume in Q3

NPL gross revenue development

(EUR million)

31 25 40 52 50 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

10

  • Slight decline from Q1
  • Q1 revenue effect from one-off payments and strong initial

collection on Axactor Invest 1 portfolios acquired in Q4’18

  • Negative Easter-effect in Q2 this year
  • Sequential growth expected to resume in Q3
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SLIDE 11

Continued solid collection performance

  • Changed reporting from ‘business case’ to

‘active forecast’ – in line with industry standards

  • Active forecast reflects changes made to the

ERC curves on an ongoing basis

  • Active forecast is in line with the P&L reporting
  • Adjustments to portfolio values have been taken over

the P&L on an ongoing basis as deviations have

  • ccurred

Actual collection vs. active forecast

(LTM, rolling)

100% 101% 108% 112% 106% Q2 18 Q3 18 Q4 18 Q1 19 Q2 19

11

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SLIDE 12

NPL: Investment uptick

Quarterly NPL investments

(EUR million)

  • Acquired several new portfolios in Q2:
  • Three Spanish NPL portfolios with combined
  • utstanding balance of EUR 717m
  • Acquired one-off portfolio from existing forward flow

client in Sweden, with principal value of EUR 26m

  • Invested EUR 80m in forward flow volumes in

Q2

  • New forward flow contracts coming in on improved

terms

17 69 329 69 149 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

ESP NOR DEU SWE ITA FIN

12

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SLIDE 13

NPL: Forward flows

Estimated FF investments from signed contracts

(EUR million)

  • Total estimated forward flow volume of EUR

274m from signed contracts in 2019, o/w EUR 127m in 2H’19

  • More selective approach given the upwards trend

in IRRs

  • Contracts are renegotiated or discontinued at expiry date.

Expect to see contracts with new clients coming in on improved terms

  • Prioritizing new 3PC clients to capture synergies

23 19 25 25 27 28 22 23 22 22 22 16

Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19

Actual FF investments Estimated FF investments

13

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SLIDE 14

NPL: Increasing and balanced portfolio

ERC development

(EUR million)

Forward ERC profile by year

(EUR million)

729 821 1 388 1 473 1 721

200 400 600 800 1 000 1 200 1 400 1 600 1 800 2 000

Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

ESP NOR DEU SWE ITA FIN

256 220 181 165 139 120 108 96 86 77 69 61 54 48 40

25 50 75 100 125 150 175 200 225 250 275 300

Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Y13 Y14 Y15 ESP NOR DEU SWE ITA FIN

14

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SLIDE 15

3PC

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SLIDE 16

Growing the third-party collection business

  • 3PC & ARM sales up 19% y/y
  • 3PC platforms established in all six markets – ARM

gradually being rolled out in more markets

  • Increasing synergies with the NPL business
  • Product synergies in business origination, collection

execution and data generation Gross revenue 3PC

(EUR million)

13 12 15 14 16

2 4 6 8 10 12 14 16 18

Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

16

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SLIDE 17

Strengthening the Nordic 3PC business

3PC revenue split by geographic region

  • The finance sector accounts for three quarters
  • f the 3PC revenue
  • Strong position in Spain
  • 9 of the top 10 banks as clients
  • Sharpening the focus on the Nordic

bank/finance market

  • Synergies to be extracted from cross-border deals
  • Signed one new banking client in Sweden, pipeline for

new contracts in Norway and Finland

  • Seeking combined 3PC and forward flow deals to

improve collection performance and profitability

ESP; 61% Nordic; 19% DEU/ITA; 20%

17

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SLIDE 18

Standardization across markets generating scale benefits

  • New debtor portal launched in Spain and Italy, launch in

remaining markets in Q3

  • Standard dialer implemented in all markets with

centralized traffic control team in Spain

  • Investing in new data warehouses and business

intelligence systems

  • Benchmarking test to assess collection procedures in

Italy

  • Cost efficiency programs in Spain and Germany

18

Axactor Efficiency Model 2.0 (Operations & IT) Client Relationships Innovation & Digitalization

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SLIDE 19

REO port rtfo folio io

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SLIDE 20

Stable REO sales on declining asset base

  • Revenue +2% from Q1 - on a lower asset base
  • Change in sales mix with more parking and storage

spaces sold in Q2

  • No. of units sold: Up from 555 in Q1 to 657 in Q2
  • Average sales price declined from 44k to 38k
  • Continuing to prioritize margins over volumes
  • Less focus on bulk sales, as individual sales carry higher margin

22 19 20 25 25 6 161 7 388 6 323 5 773 5 130 1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000

10 20 30

Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 REO sales

  • No. of assets in inventory

REO gross revenue development

(EUR million) 20

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SLIDE 21

REO: Remaining ERC of EUR 217m per Q2

  • Remaining ERC lowered by EUR 2m (~ 1%)
  • 50% of the REO ERC is expected to be realized over

the next 12 months

  • REO represents 11% of Group ERC, and declines

rapidly

  • Axactor has approximately 40% of the total exposure
  • Minority shareholders in both Reolux and its subsidiaries
  • No new REO investments going forward

109 74 26 9

20 40 60 80 100 120

Y1 Y2 Y3 Y4

REO: ERC profile

(EUR million) 21

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SLIDE 22

Fin inancials

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SLIDE 23

Contribution per segment

13 12 26 27 25 2 2

  • 1

3 2 4 4 5 4 8

Q2 2018 Q3 2018 Q4 2018 Q1-19 Q2-19 NPL portfolios REO portfolios 3PC

Contribution per segment1

(EUR million) - Excluding unallocated overhead cost 23

1Contribution before allocation of local SG&A and IT cost, management fee, central administration costs, other gains and losses or finance costs

Segment contribution margin = Segment contribution/Segment net revenue Total segment contribution less unallocated cost = EBITDA

  • NPL:
  • Stable gross collection from previous quarter

with slightly higher portfolio amortization

  • 80% contribution margin
  • 3PC:
  • Strong sales improvement: y/y and q/q
  • 50% contribution margin
  • REO:
  • Stable sales level
  • Q2 contribution margin at 9%
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SLIDE 24

Net finance, tax and net profits

  • Total net financial cost of EUR 13.9m
  • Interest cost of EUR 13.0
  • Average blended interest costs of 5%
  • Warrant cost EUR 0.4m
  • Negative net FX impact of EUR 0.3m
  • Tax expense of EUR 3.7m
  • 37% effective tax rate (42% in Q1)
  • Some entities not yet in position to recognize tax losses
  • Net profit of EUR 6.2m
  • EUR 4.6m to equity shareholders
  • EUR 1.5m to non-controlling minorities

Condensed Income statement

(EUR thousand) 24 For the quarter end YTD EUR thousand 30 Jun 2019 30 Jun 2018 30 Jun 2019 30 Jun 2018 Full year 2018 EBIT 23 748 9 134 43 622 13 891 40 298 Financial revenue 29 283 43 374 453 Financial expenses

  • 13 961 -8 804 -25 878-14 345
  • 34 591

Net financial items

  • 13 932 -8 521 -25 835-13 971
  • 34 138

Profit/(loss) before tax 9 815 614 17 787

  • 80

6 160 Tax (expense)

  • 3 661
  • 442
  • 7 009
  • 744
  • 3 770

Net profit/(loss) after tax 6 154 172 10 778

  • 825

2 390 Net profit/(loss) to Non-controlling interests 1 549

  • 83

4 133 342

  • 2 103

Net profit/(loss) to equity holders 4 605 254 6 645 -1 167 4 492 Earnings per share: basic 0.030 0.002 0.043 -0.008 0.029 Earnings per share: diluted 0.026 0.001 0.038 -0.007 0.026

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SLIDE 25

Balance sheet structure

1 072 539 929 82 80 82 32 19 26 69 121 71

Q2-19 Q2-18 YE 2018 Cash Other Intangibles Portfolios

376 314 328 832 407 737

47 39 43 Q2-19 Q2-18 YE 2018 Other IB debt Equity

Equity and Liabilities

(EUR million)

Assets

(EUR million) 25

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SLIDE 26

Q2 2019 – Funding structure

26

  • Net interest bearing debt of EUR 765 million
  • Added EUR 235m in funding in 1H’19
  • Released accordion options with Nordic bank (EUR 100m in February + EUR 50m in June)
  • EUR 50m bond tap option executed in March, EUR 50m remaining
  • EUR 15m equity injection and EUR 20m new mezzanine loan from Geveran to Axactor Invest 1 in April

31.12.2018 31.12.2019 30.12.2020 30.12.2021 30.12.2022 Revolving Credit Facility, EUR 350m Axactor Invest 1, EUR120m senior debt facility Bond, EUR 200m + EUR 50m tap option Axactor Invest 1, EUR 140m mezzanine

Option

Reolux/Nomura REO financing EUR 75m

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SLIDE 27

Scale and maturity drives efficiency, profitability and ROE

Revenue, Local SG&A and IT&Group costs

(LTM)

25% 21% 18% 17% 15%

50 100 150 200 250 300 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Net revenue EBITDA Local SG&A, IT and corporate cost 27

  • Growth strategy focused on scale benefits,

business synergies and standardization

  • Margins improving as opex ratios come down
  • Financing costs and lower tax rates set to

support positive ROE development going forward

  • Room for lower cost of capital when refinancing credit

facilities and bond

  • Tax rate gradually normalizing
  • 61% in 2018, 42% in Q1’19, and 37% in Q2’19
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SLIDE 28

Summary and outlook

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SLIDE 29

Q2 Summary

  • Solid y/y NPL growth, and healthy growth in a more

active 3PC market

  • Strong margin improvement & Earnings Before Tax of

EUR 10 million

  • ERC doubling the last 12 months
  • Continuing to drive efficiency and cost improvement

through ‘One Axactor’

  • Healthy 2H NPL Pipeline
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SLIDE 30

Outlook

  • Attractive opportunities in the NPL market – lower

portfolio prices/ increasing IRRs

  • Clients more focused on Total Value Chain

Partnership “opening up” the 3PC market

  • Axactor maintaining 2019 capex estimate of EUR

400-450 million

  • Our collection profiles point towards continued

profitable growth and margin expansion through 2019

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SLIDE 31
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SLIDE 32

Appendix

slide-33
SLIDE 33

P&L statement

For the quarter end YTD EUR thousand 30 Jun 2019 30 Jun 2018 30 Jun 2019 30 Jun 2018 Full year 2018 Interest income from purchased loan portfolios 32 475 16 061 61 464 34 466 74 536 Net gain/loss purchased loan portfolios

  • 1 188

2 998 5 182 232 10 599 Other operating revenue 41 132 35 327 79 421 55 488 121 774 Total Revenue 72 418 54 386 146 067 90 186 206 909 Cost of REO's sold, incl impairment

  • 20 205
  • 17 353
  • 39,720
  • 23 476
  • 54 491

Personnel expenses operations

  • 9 132
  • 7 975
  • 18 565
  • 16 061
  • 32 585

Personnel expenses other

  • 4 794
  • 5 170
  • 10 896
  • 10 444
  • 19 548

Operating expenses

  • 12 143
  • 13 278
  • 28,602
  • 23 498
  • 53 978

Total operating expense

  • 46 273
  • 43 776
  • 97 782
  • 73 479
  • 160 602

EBITDA 26 145 10 610 48 285 16 707 46 306 Amortization and depreciation

  • 2 397
  • 1 476
  • 4 663
  • 2 816
  • 6 009

EBIT 23 748 9 134 43 622 13 891 40 298 Financial revenue 29 283 43 374 453 Financial expenses

  • 13 961
  • 8 804
  • 25 878
  • 14 345
  • 34 591

Net financial items

  • 13 932
  • 8 521
  • 25 835
  • 13 971
  • 34 138

Profit/(loss) before tax 9 815 614 17 787

  • 80

6 160 Tax (expense)

  • 3 661
  • 442
  • 7 009
  • 744
  • 3 770

Net profit/(loss) after tax 6 154 172 10 778

  • 825

2 390 Net profit/(loss) to Non-controlling interests 1 549

  • 83

4 133 342

  • 2 103

Net profit/(loss) to equity holders 4 605 254 6 645

  • 1 167

4 492 Earnings per share: basic 0.030 0.002 0.043

  • 0.008

0.029 Earnings per share: diluted 0.026 0.001 0.038

  • 0.007

0.026

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SLIDE 34

Balance sheet statement

EUR thousand 30 Jun 2019 30 Jun 2018 31 Dec 2018 ASSETS Intangible non-current assets Intangible Assets 19 678 19 300 19 170 Goodwill 56 288 54 470 55 577 Deferred tax assets 6 117 6 612 7 564 Tangible non-current assets Property, plant and equipment 3 157 2 533 2 683 Right-of-use assets 6 562 Financial non-current assets Purchased debt portfolios 909 702 358 505 728 820 Other non-current receivables 289 1 228 293 Other non-current investments 764 170 778 Total non-current assets 1 002 557 442 818 814 885 Current assets Stock of Secured Assets 162 471 180 528 200 009 Accounts Receivable 8 538 9 454 9 459 Other current assets 12 256 6 073 12 774 Restricted cash 2 830 37 3 184 Cash and Cash Equivalents 66 505 121 001 67 593 Total current assets 252 600 317 092 293 018 TOTAL ASSETS 1 255 157 759 910 1 107 903 EUR thousand EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Share Capital 81 338 80 842 81 115 Other paid-in equity 201 141 198 908 200 298 Retained Earnings

  • 7 527
  • 19 884
  • 14 172

Reserves

  • 2 255
  • 883
  • 2 817

Non-controlling interests 103 217 55 244 63 746 Total Equity 375 914 314 226 328 170 Non-current Liabilities Interest bearing debt 552 788 369 503 567 829 Deferred tax liabilities 10 705 5 336 11 124 Lease liabilities 4 108 Other non-current liabilities 1 504 3 702 1 180 Total non-current liabilities 569 104 378 541 580 132 Current Liabilities Accounts Payable 3 163 2 136 4 522 Current portion of interest bearing debt 278 958 37 131 169 296 Taxes Payable 6 805 4 182 1 610 Lease liabilities 2 489 Other current liabilities 18 723 23 694 24 172 Total current liabilities 310 139 67 143 199 600 Total Liabilities 879 243 445 684 779 732 TOTAL EQUITY AND LIABILITIES 1 255 157 759 910 1 107 903

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SLIDE 35

Axactor SE (Norway) Axactor Platform Holding AB (Sweden) Axactor Finland Holding Oy (Finland) Axactor Finland Oy Axactor Finland SW Oy (to be discontinued) SPT Latvija SIA (Latvia) SPT Inkasso OÜ (Estonia) UAB Isieskojimu kontora (Lithuania) (to be discontinued) Axactor Norway Holding AS (Norway) Axactor Norway AS Axactor Germany Holding GmbH (Germany) Axactor Germany GmbH Heidelberger Forderungskauf GmbH Taloa Equity Management GmbH VABA GmbH Axactor Mobile Services Germany GmbH Heidelberger Forderungskauf II GmbH Axactor España, S.L.U. (Spain) Axactor España Platform S.A. Axactor Sweden Holding AB (Sweden) Axactor Sweden AB Axactor Capital Sweden AB (to be discontinued) Axactor Portfolio Holding AB (Sweden) Axactor Capital Luxembourg S.à r.l. Axactor Capital Italy S.r.l Axactor Capital AS Reolux Holding S.à r.l. Beta Properties Investments S.L.U Borneo Commercial Investments S.L.U. Alcala Lands Investments S.L.U. PropCo Malagueta S.L. Proyecto Lima S.L. Axactor Italy Holding S.r.l. (Italy) Axactor Italy S.p.A. Axactor Incentive AB (Sweden) (to be discontinued) Axactor Invest 1 S.à r.l.* (Luxembourg) 75% 75%

Legal organization July 2019

50% 50%

  • *50% of the shares in Axactor Invest 1 S.à r.l. and Reolux Holding S.à r.l. is held by Geveran Trading Co. Limited (Cyprus).
  • *Geveran Trading Co. Limited also holds shares of Axactor SE