30 Nov 2022

Q3 and nine months report January - September 2022

Strong Q3 with positive net income following increasing collections

 

Highlights third quarter 2022

 

• Gross collections amounted to EUR 23.4m (12.7)*
• Net collections amounted to EUR 21.0m (9.0)*
• Cash EBITDA amounted to EUR 17.5 (6.6)*
• Net profit for the period of EUR 0.8m (loss of 3.2)*
• Gross ERC at the end of September 2022 was EUR 295m (299 at December 2021)
• Cash at the end of September 2022 was EUR 57.8m (65.5 at December 2021)
• Acquisition of 50.2% of AxFina Holding S.A, a pan European debt servicing provider and business outsourcing company

 

Highlights nine months 2022

 

• Gross collections amounted to EUR 55.3m (43.0)*
• Net collections amounted to EUR 47.9m (34.8)*
• Cash EBITDA amounted to EUR 40.0m (27.1)*
• Net loss for the period of EUR 5.1m (loss of 3.0)* including EUR 6.0m non-cash negative mark-to-market impact from the investment in Addiko Bank driven by the proposed CHF law in Slovenia and market volatility
• Investment in a bolt-on portfolio in Croatia with a gross collection value (face value) of over EUR 20m
• Strategic partnership in Italy with co-investment in a portfolio with a gross collection (face value) of over EUR 10m

 

Significant events after the end of the quarter

 

• Agreement reached to combine acquisition of Swiss Bankers and investment in Omnio with leading Nordic credit institution Nordiska Kreditmarknadsaktiebolaget (publ) ("Nordiska")

 

 Comment by the CEO

Collections picked up in the third quarter and amounted to EUR 23.4m in line with expectations on the back of strong contribution by our JV. Gross collections increased 84% compared to the same period in 2021 despite the general market volatility. This reflects the resilience of the markets DDM operates in. The key Croatian real estate market continued to be supportive with collections on our secured NPL portfolios and repossessed real estate collaterals.

FX movements were also supportive during the quarter resulting in a net profit of EUR 0.8m and ending the period with EUR 57.8m of cash.

Agreement reached to combine acquisition of Swiss Bankers and investment in Omnio with Nordiska

An agreement has been reached with the leading Nordic credit institution Nordiska to combine Swiss Bankers and DDM`s investment in the cloud-based banking platform Omnio under the newly formed Nordiska Financial Solutions Group.

As part of this transaction, DDM will invest approximately SEK 450m to SEK 550m into Nordiska to become the largest (but not controlling) shareholder. In turn, Nordiska will step into the agreement to acquire 100% of the share capital of Swiss Bankers Prepaid Services AG (“Swiss Bankers”) which was initially signed by DDM in December 2021.

The transaction follows DDM’s strategy to act as an investor and partner for financial institutions in Europe and to acquire assets and participations in companies previously held by banks, assisting them in digitalisation and the distribution of low-cost financial consumer products.

DDM will support Nordiska’s transition to a Pan-European cloud-based, fully digitalized financial solutions group focusing on European bank consumers. The closing of the transaction is subject to certain conditions including the granting of all necessary regulatory approvals.

The intention of the main shareholders of the newly combined group is to work towards a listing of Nordiska in the coming 12-18 months subject to market conditions.

Continued market volatility expected to increase NPL volumes

We expect the market volatility observed during the year to continue in 2023. Given the uncertainties in the macroeconomic environment and the impact of inflation on businesses and the cost of living for consumers, we expect continued market volatility and investment opportunities. Given this background, we continue to monitor opportunities both in existing markets and new markets by teaming up with strategic partners and co-investors. 

Acquisition of majority stake in debt servicing and business outsourcing company AxFina

At the beginning of Q3, DDM Debt AB (“DDM Debt”), acquired 50.2% of the share capital of AxFina Holding SA (“AxFina”). AxFina is a pan European debt servicing provider and a key partner for DDM’s loan portfolios. In addition to its core debt servicing solutions, AxFina is also providing business outsourcing services and digital debt management solutions (“Finastic”) to multiple industries. AxFina is active in 7 countries and has c. 180 employees.

DDM expects to profit from the intended growth of the service revenues of AxFina, both in (third party) debt servicing as well as in digital solutions, which complement the asset intensive business of DDM. AxFina will also facilitate new market entries for DDM. The seller of the stake in AxFina was DDM Group Finance S.A, with the transaction carried out at an implied valuation for 100% of AxFina of EUR 28m. AxFina will remain an independently run company. The acquisition strengthens DDM’s equity story to accelerate into a pan-European investment company around NPLs, Servicing, Consumer Finance and FinTech.

Equity base

We continue to evaluate our options to access equity or equity linked capital markets. We have therefore intensified our work to be prepared to capture the opportunities we expect to come up in the coming quarters.

Andreas Tuczka new Chairman of DDM

The Chairman of DDM, Jörgen Durban, has stepped down from his roles at DDM and will concentrate on his role as Chairman of Nordiska. Andreas Tuczka, board member of DDM since 2017, has taken over the position as Chairman of DDM.

Financial calendar

DDM intends to publish financial information on the following dates:

Q4 and full year report for January – December 2022: 16 March 2023

Annual report 2022:                                                       28 April 2023

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

Presentation of the report

The report and presentation material are available at www.ddm-group.ch on 30 November 2022, at 08:00 CEST.

CEO Florian Nowotny and CFO Fredrik Olsson will comment on the DDM Group’s results during a conference call on 30 November 2022, starting at 10:00 CEST. The presentation can be followed live at www.ddm-group.ch and/or by telephone with dial-in numbers: CH: +41 22 567 56 32, SE: +46 8 505 583 66, UK: +44 333 300 9270.

The information in this 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 28 July 2022 at 08:00 CEST.