Axactor SE

Investor Presentation • Oct 4, 2016

Investor presentation October, 2016

The Altor acquisition

Altor transaction details

Key transaction details

• Deal value of EUR 34.1m on an enterprise value basis with equity valued at of ~EUR 17.7m The acquisition (on an enterprise value basis) will be financed through ~EUR 17.1m debt
• financing from the DNB and Nordea facility, remaining amount will be settled with cash on hand1)
• The transaction was closed 30 September 2016
• The acquisition includes NPL portfolios with a principal value of EUR 1.0bn, whereof 16 portfolios has been acquired the last 5 years with a principal value of 0.8bn
• In addition, the company has 1.1bn under management on behalf of external clients
• ALTOR group has been family owned with two individuals holding 100% of the holding company and all group companies

Altor in brief

• A leading independent debt purchase/debt collection company in Germany with EUR 2.1bn under management
• Altor had gross collections of more than EUR 10m in 2015
• In 2016, the company acquired a large portfolio with a capex of EUR 13m • Strong portfolio analysis and pricing team
• New collection system implemented

Strong focus on financial institutions1)

Notes: 1) based on outstanding balance of receivables 2) Amortization of portfolios over approx. 4 years according to German GAAP (booked below EBITDA)

• 1979 Established in Heidelberg
• 2010 Professionalization of IT platform and flow processes
• 2015 Decision to wind down French and Polish operations
• 2016 Acquisition of a larger portfolio from local bank (~EUR 13m capex)

Altor fulfills Axactor's strategy for market entry

	Highly attractive German market	• Traditionally a strong NPL market, with large volumes for sale • Highly attractive portfolios with stable cash flow • We expect increased momentum in the German NPL the next 12-24 months
	Strong business with profitable 3PC operations and several owned NPL portfolios	• Profitable 3PC operations set to serve portfolio volumes to be acquired by Axactor • Acquired 16 NPL (non-performing loans) portfolios with a total face value of more than EUR 800m over the last five years
	Entering the remaining current priority geography – fulfilling Axactor's geographical strategy	• Germany is the "missing piece" in order for Axactor to be established in the four key markets (Spain, Norway, Italy and Germany) • The "preferred platform acquisition" for Axactor's growth strategy in Germany
	An important step in being able to secure more financing and increase gearing	• Passing the threshold in our existing bank facility with Germany as our fourth geographical market (third within the ring fence) • The company has opened discussions with the bank consortium to make accordion option 3 and 4 available

This is Axactor

This is Axactor

• Established in Q4 2015 as an ambitious and fast-growing debt collection and debt purchase company1)
• Main focus on collection and acquisition of non-performing loans ("NPL") from financial institutions
• Led by a management team with strong track record from the purchased debt and debt collection industry
• En route to execute on clearly defined entry strategy and build an efficient and high-quality company without any legacy burdens
• Headquartered in Oslo, Norway
• ~850 employees in Norway, Spain, Italy and Germany2)

Opportunistic view on the Nordics. Other geographies under evaluation.

Overall strategic direction remains unchanged

Axactor short-term priorities

Continue acquisition of attractive portfolios in all four countries

Secure new 3PC clients in all markets, including bank carve-outs

Operational focus – standardize IT platform, implement group dialer in all countries, align KPIs across countries and cross-country learning

Increase gearing towards long-term target of 75% and continue to evaluate co-investment partners

Company priorities next 3-6 months

Axactor key investment attractions

	Axactor key investment attractions
Attractive fundamentals within NPL purchase market	• Large European NPL stocks on banks' balance sheets • Double-digit growth in NPL sales volume in Europe driven by regulatory changes (Basel III, IFRS etc.) • Strong growth trend in second-hand portfolio sales
Experienced management team with demonstrated track record	• Unparalleled industry track record, in particular within the target geographical regions • Long-lasting relationships with Financial Institutions across Europe • Unique debt portfolio pricing and collection competencies
Strong position established in key markets – enabling bilateral portfolio and platform discussions	• Strong position created in Spain, Italy and Norway – entering Germany with the "best platform" available establishes Axactor in all four "key markets" • Access to attractive portfolios through invitations to bilateral discussions and closed tenders • Proven execution capabilities through a number of completed portfolio acquisitions • Full focus on driving returns through further portfolio acquisitions and operational excellence
Attractive financial profile and flexible financing structure to ensure gearing of portfolio purchases towards target leverage	• Attractive cash generation locked in as the company continues to invest and collect on debt portfolios • Increasing leverage will be a key value driver going forward as the company acquires portfolios On the path of gradually increasing gearing from 35% up towards 75%1) • long term target
Notes: 1) Loan agreement gives a maximum gearing of 65%; Long-term target 75% supported by industry standards	12

Key market dynamics

Key market dynamics in Spain

	Key market dynamics in Spain
	Portfolio dynamics [ ]		Key highlights / trends
		AXA key focus	• Funds shifting focus more towards secured
IRR: 10% - 11% Size: EUR 30m+	• Firsthand portfolios, sold directly form the largest banks • Tender offers with several bidders invited, both industrial and financial investors • Large transactions		assets • However, still strong competition on large, firsthand portfolios in B2C unsecured • Relationship key element in getting access
IRR: 13%+ Size: EUR 1-15m	• Medium-sized portfolios • Possible to be negotiated bilaterally or with 1-2 other bidders • Relations key to gain access to portfolios		to bilateral negotiations and hence portfolios with more attractive IRRs • Bank carve-out trend continues
IRR: 15%+ Size: EUR 10-30m	• Secondhand portfolios (e.g. investment funds exiting portfolio investments/or market) • Negotiated bilaterally or with 1-2 other bidders • Relations key to gain access to portfolios	

• Funds shifting focus more towards secured

• However, still strong competition on large, firsthand portfolios in B2C unsecured

• Relationship key element in getting access to bilateral negotiations and hence portfolios with more attractive IRRs

Key market dynamics in Italy

	Portfolio dynamics		Key highlights / trends
		AXA key focus
IRR: 10% - 13% Size: EUR 30m+	• Firsthand portfolios, sold directly form the largest banks • Tender offers with several bidders invited, both industrial and financial investors • Large transactions		secured debt due to higher ticket/investments
IRR: 13%-15% Size: EUR 1-15m	• Medium-sized portfolios • Possible to be negotiated bilaterally or with 1-2 other bidders • Relations key to gain access to portfolios	
IRR: 15%+ Size: EUR 10-30m	• Secondhand portfolios (e.g. investment funds exiting portfolio investments/or market) • Negotiated bilaterally or with 1-2 other bidders • Relations key to gain access to portfolios		government)

• The international funds have clear focus on secured debt due to higher

• The market for B2C unsecured is opening up and the number of portfolios is increasing

• Axactor meets usually a handful of competitors in B2C, but some local players are investing aggressively in the segment

• Strong focus on improving/simplifying the regulatory environment (from the Italian

Key market dynamics in Germany

Portfolio dynamics		Key highlights / trends
	AXA key focus
• Firsthand portfolios, sold directly form the largest banks • Tender offers with several bidders invited,
• Large transactions
• Medium-sized portfolios • Possible to be negotiated bilaterally or with 1-2 other bidders • Relations key to gain access to portfolios	
	both industrial and financial investors	Key market dynamics in Germany 

• All the largest industrial players are represented in Germany, creating tough competition for large FI portfolios

• The bank carve-out trend continues

• The bad banks have not been forced to sell off NPLs, however, we believe this is about to change over the next 12-24 months

• The market is more or less fully consolidated with the exception of some small, family owned collection companies

Key market dynamics in Norway

• We have seen some large transactions the last 12 months at high prices and single digit

	Key market dynamics in Norway
	Portfolio dynamics		Key highlights / trends
		AXA key focus
IRR: 10% - 11% Size: EUR 30m+	• Firsthand portfolios, sold directly form the largest banks • Tender offers with several bidders invited, both industrial and financial investors • Large transactions		IRR
IRR: 11%-13% Size: EUR 1-15m	• Medium-sized portfolios • Possible to be negotiated bilaterally or with 1-2 other bidders • Relations key to gain access to portfolios	

• The NPL volumes have increased significantly over the last years, and past due cases are record high

• A high number of new consumer banks have been established the last 2-3 years and we expect these banks to start selling off NPL when the volumes of unpaid debt reaches a certain size (we have already seen some minor portfolio sales from these banks)

• E-commerce players selling portfolios and makes "forward flow" deals

Financial considerations

Axactor financial targets

Medium-to-long term financial targets will vary significantly in based on geography and maturity of each market

	Target	To date	Medium-to-long term target
1 Portfolio	Axactor investments	Portfolio investment sizes of ~EUR 1-15 million	Portfolio investment sizes of ~EUR 1-25 million
size (EURm)	Co-investments	n.a.	Portfolio investment sizes of ~EUR 25-100 million
2	Portfolio MoC ("Multiple on Capital")	~2.5x	2.0x - 3.0x
3	Gross portfolio payback time	~3 years	~3-4 years
4	Gearing	35% on portfolios outside Italy 100% on portfolios in Italy	65% - 75% on corporate level

Axactor purchased debt portfolio overview

CS Union at the time of acquisition

Kosmetisk endring – siste bullet

Financing – gearing to increase investment capacity…

including Italy which is presently outside the ring fence

gearing on portfolio acquisitions (2.0-2.5% margin)

… and be a direct value contributor

Notes: 1) Gross profit (accounting) + add-back of portfolio amortizations (non-cash)

Funding considerations

Key financials Q1- and Q2-16

• ALD Abogados included in Q1-16 financials • Full quarter effect of IKAS in Q2-16, in addition to 1.5 month P&L effect of Geslico
• No P&L effect of CS Union, but included in the balance sheet as of Q2-16
• In July 2016 the company had positive Cash EBITDA for the month isolated
• Cash EBITDA = adjusted for calculated cost of share option program and portfolio amortizations • Normalized EBITDA = EBITDA adjusted for one-off costs mainly
• related to M&A activities

	Income statement					Key comments
SEK thousand Gross revenue Amortization of debt portfolios	Q2-16 72 270 -7 833	Q1-16 29 404 -1 492	H1-16 101 674 -9 325	2015 4 437 0	•	ALD Abogados included in Q1-16 financials
Net revenue Operating expenses Personnel expenses EBITDA	64 437 -59 844 -36 112 -31 519	27 912 -18 152 -20 258 -10 498	92 349 -77 996 -56 370 -42 017	4 437 -29 940 -5 089 -30 592	• •	Full quarter effect of IKAS in Q2-16, in addition to 1.5 month P&L effect of Geslico No P&L effect of CS Union, but included in the balance sheet as of Q2-16
Amortization and depreciation EBIT	-6 671 -38 190	-2 464 -12 962	-9 135 -51 152	-837 -31 429	•	In July 2016 the company had positive Cash EBITDA for the month isolated
Financial revenue Financial expenses Net financial items	17 112 -8 288 8 824	4 253 -6 960 -2 707	21 365 -15 248 6 117	329 -30 218 -29 889		and portfolio amortizations
Profit/(loss) before tax	-29 366	-15 669	-45 035	-61 318	•	Normalized EBITDA = EBITDA adjusted for one-off costs mainly related to M&A activities
Tax expense Net profit/(loss) from continued operations	3 511 -25 855	773 -14 896	4 284 -40 751	0 -61 318
Cash EBITDA	-19 300	-6 800	-26 100	-
Normalized EBITDA	-14 400	-10 300	-24 700	-

> € 1trillion Non-Performing Loan (NPL) FI market in Europe

Key trends in the debt purchase/debt collection industry

1 Strong growth of NPL portfolios coming to market	• Strong growth in second-hand portfolio transactions • Regulatory changes driving debt sales • Strengthened FI balance sheets enable portfolio sales • Approaching "price equilibrium" between sellers and buyers
2 Outsourcing trend (carve-outs of collection units)	• Several major carve-outs from European banks • FI regards debt collection as non-core operations • Debt collection agencies achieve higher solution rates
3 Industry consolidation	• Market maturity and professionalization • Technology enables increased scale advantages • Capital constraints – access to capital key success criteria • Influx of private equity players / IPO activity

Axactor entry strategy

Axactor will cover all major parts of the value chain

Axactor focus on established markets with strong growth

• Axactor's initial focus is Spain, Germany and Italy

• Developed markets with strong growth
• Strong relationships with financial institutions
• Access to high-quality platforms

• Opportunistic approach towards Nordic markets, exemplified by Axactor's entry in Norway, and Rest of Europe

Axactor value drivers: debt purchase and debt collection

rd party debt collection

• Portfolios acquired with a target collection amount
• FI portfolios typically generate stable and long-term cash flows FI portfolios normally have low decay rates, and are hence long-tailed
• Cash flow visibility allows the best players to impact return and optimize value through pricing and pre-determined targets
• Axactor's management has a track record of strong pricing discipline and extending portfolio cash flows beyond the initial forecast period resulting in above estimated returns

– Axactor has strong execution capabilities and provides reliability to its

rd party collection often translates into portfolio acquisitions through

• Strong value proposition in Europe many customers require cross-border 3rd party collection
• counterparts
• 3 due to existing track-record and relationships
• Collection insight offers pricing advantage
• The 3rd party collection business generates attractive margins in an
• Stable and diversified businesses serving multiple customers
• Good cash flow supporting portfolio acquisitions
• 3 rd party collection is a valuation driver

efficient setup benefiting from scale advantages

– Axactor has through its new setup a highly competitive cost structure with streamlined group functions and no legacy business

Shorter time to market for successful acquisitions of portfolios in the respective market

Q2 balance sheet

Q2 balance sheet
	Assets			Equity and liabilities
SEK thousand	31.06.2016	31.03.2016	31.06.2015
ASSETS				EQUITY & LIABILITIES
Intangible non-current assets				Equity attributable to equity holders of the parent
Intangible assets	118 044	43 718	31 742
Goodwill	408 860	124 467
Tangible non-current assets
Property, Plant and equipment	20 272	1 669	482
Financial non-current assets
Purchased debt portfolios	594 298	250 722	-	Non-current liabilities
Other long term receivables	10 689	0	52
Other long term investments	402	667	359
Total non-current assets	1 152 566	421 243	32 635
Current Assets
Current receivables	51 682	63 579	437
Other current assets	54 600	6 462	224	Current liabilities
Restricted cash	49 062	-	-
Cash and cash equivalents	283 442	185 793	54 961
Total current assets	438 787	255 834	55 622
	1 591 353	677 077	88 257

TOTAL ASSETS	591 353	677 077	88 257

SEK thousand	31.06.2016	31.03.2016	31.06.2015
EQUITY & LIABILITIES
Equity attributable to equity holders of the parent
Share capital	473 244	328 107	45 405
Other paid-in capital	1 884 121	1 541 773	1 256 648
Retained earnings and profit for the period	-1 330 758	-1 304 902	-1 226 461
Reserves	-2 976	-1 917	-
Non-controlling interests	2 755	-	75
Total equity	1 026 387	563 060	75 667
Non-current liabilities
Non-current interest bearing debt	276 300
Convertible loan	-	0	5 000
Deferred tax liabilities	23 862	10 820
Other non-current liabilities	13 080	2 912
Total long term liabilities	313 241	13 732	5 000
Current liabilities
Accounts payable Current portion of non-current borrowings	104 426 72 149	13 559 -	881 -
Taxes Payable	15 273	-	-
Other current liabilities	59 876	86 726	6 709
Total current liabilities	251 725	100 285	7 590
TOTAL EQUITY AND LIABILITIES
	1 591 353	677 077	88 257