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Axactor SE
Earnings Release • May 9, 2023
3549_rns_2023-05-09_60490efc-d71c-4959-9c26-7d38406e0a61.pdf
Earnings Release
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Axactor helps people and companies to a better future
We are passionate, proactive and act with integrity
/First quarter 2023 highlights1
- Continued growth in the first quarter 2023, with gross revenue up 5% and total income up 8% from the first quarter last year
- Profitability upheld with an EBITDA margin expansion to 49% (48%)
- Annualized return on equity for continuing operations of 8% (8%), while total annualized return on equity for shareholders ended at 7% (7%)
- Investments in NPL portfolios of EUR 32.8 million (79.6), with a further EUR 42.0 million committed for the remainder of 2023
- Cash EBITDA continued to grow, ending at EUR 51.4 million for the quarter (49.2)
- Axactor continued its bond buybacks in the first quarter, acquiring a total face value of EUR 13.5 million. The total face value of treasury bonds at the end of the quarter was EUR 63.0 million
- Digital collection and self-service solutions continued to increase, resulting in both improved accessibility for debtors and lower cost for Axactor
- Further improvements in the advanced analytics scorecards work, with significantly improved hit rate for cases sent to legal collection
Events after the period
In April, Axactor announced the renewal of its revolving credit facility (RCF) for a new three-year maturity, with an option for a further two-year extension contingent on separate credit approval. The existing agreement has a maturity in December 2023 and is thus classified as current interest-bearing debt in the first quarter financial statements. The new facility is of the same size and a similar structure as the existing agreement and is made at satisfactory terms.
On 3 May 2023, the annual general meeting elected Terje Mjøs as chair of the Board. Terje Mjøs previously held the position as director of the Board. Kjersti Høklingen was elected as a new Board director, whereas Brita Eilertsen and Lars-Erich Nilsen were re-elected as directors of the Board for another term.
1 The highlights section refers to Axactor's continuing operations, unless explicitly stated otherwise. For more information, please refer to note 11 Discontinued operations
Key figures presented are for continuing operations unless otherwise stated. See note 11 for more information on discontinued operations. Key figures that can not be directly found in the Group's consolidated statements are reconciled in the APM tables.
| EUR million | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 |
|---|---|---|---|
| Gross revenue | 83 | 78 | 337 |
| Total income | 62 | 57 | 240 |
| EBITDA | 30 | 28 | 119 |
| Cash EBITDA from continuing operations | 51 | 49 | 218 |
| Net profit/(loss) after tax from continuing operations | 8 | 8 | 41 |
| Return on equity to shareholders, annualized 1 | 7% | 7% | 9% |
| Return on equity, continuing operations, annualized | 8% | 8% | 10% |
| Equity ratio | 28% | 29% | 29% |
| Acquired NPL portfolios | 33 | 80 | 288 |
| Book value of NPL portfolios | 1,242 | 1,160 | 1,253 |
| Estimated remaining collection (ERC) | 2,523 | 2,259 | 2,545 |
| Number of employees (FTEs) | 1,293 | 1,229 | 1,301 |
| Price per share, last day of period (NOK) | 6.42 | 6.68 | 5.88 |
| Market capitalization (NOK million) | 1,938 | 2,018 | 1,777 |
Gross revenue EUR million
5% y/y
EBITDA EUR million
30
49% margin
Return on equity
Cash EBITDA EUR million 51
Equity ratio
28%
1 Return on equity to shareholders includes continuing and discontinued operations
/ Operations
The first quarter of 2023 saw continued growth in NPL collections on the back of the investments carried out during 2022. Collection in Spain and Italy are so far only to a low extent impacted by the currently challenging macroeconomic environment. The impact of macroeconomic factors was however more visible in Germany and the Nordic countries during the first quarter. The clearest trend is debtors opting for longer payment plans with lower installments, at the expense of large settlements. In Spain, a nationwide strike in the legal system impacted the legal collection, resulting in delays for both NPL and 3PC. The NPL segment gross revenue was EUR 70.1m, a 7% increase from the corresponding quarter last year, with a collection performance of 98% for the quarter. Spain is the most important country in Axactor's 3PC business, and the 3PC segment was thus heavily impacted by the strike. The 3PC income for the quarter thus fell 4% compared to the first quarter last year, to EUR 12.7m.
Coming from a record low cost-to-collect in 2022 of 39% for the NPL segment, the internal ambition is always to improve. Axactor continue to focus on increasing efficiency and keeping tight cost control. The NPL cost-to-collect stayed at 39% in the first quarter 2023. This confirms Axactor's industry leading cost position.
The strike in the Spanish court system started in late January, and lasted until late March. During this period a majority of cases under process by the courts was put on hold, and new legal proceedings were delayed. Axactor continued with legal activities during the strike, to avoid unnecessary delays after the strike had been
resolved. The delayed cashflow is mainly expected to be retrieved later in 2023.
As a consequence of the inflation and rising prices, several of the governments in the Axactor markets have made changes to the amounts reserved for living costs when the bailiff is executing salary deductions. These are actions to ease the pressure on debtors from the macroeconomic changes. As a consequence, some of Axactors cases might need longer time to be fully paid.
Digital collection continues to grow
Axactor's self-service solutions for the debtors are in high focus. By promoting the service through multichannel campaigns, Axactor has created awareness around the self-service tools. Additionally, a continuous development of functionality and integrations has made the service more attractive. In the first quarter of 2023 the in-house built debtor portal had close to 33,000 logins from debtors. The Nordic countries remain the primary users of the self-service platforms.
Through the implementation of an open banking solution in the digital collection platform in Norway, Axactor is saving transaction costs on debtor payments. By using the open banking payment solution, the direct cost per transaction has decreased by 73%. Replacing card transactions with the direct account-to-account payments also reduces the workload for the internal finance departments.
In Italy, several activities are being conducted to become more digital. Processes have been built to send all larger claims through a digital legal process from Axactor to the Italian courts. The intention is to reduce handling times and have a more systematic handling of legal collection cases. At the same time, cases sent through the new system will be handled by more specialized judges for debt collection.
Advanced analytics scorecards – an integrated part of the operational improvements
The advanced analytics team has been focusing on optimizing which cases to keep in amicable collection and which cases to send to legal collection. The development is showing promising results, and is expected to increase collection by 50% for the sampled claims over a twelve month period.
As the number of machine learning models is increasing, an increasing amount of time is used on expanding and improving the existing models in production. Improvements are achieved by testing new development approaches and adding new data. Scorecards are validated using a champion/challenger approach, where cases are randomly divided between two different process variations. If a new process can be documented to outperform its challenger, this new process will be allocated a larger share of the cases.
Axactor has a high focus on exploring and improving the level of automation and data driven collection. Therefore, a pre-study was started in January 2023 to investigate external systems that can orchestrate and optimize the business processes through automation and event driven technology. This could potentially mitigate limitations in applications Axactor is using, and further increase the value of the machine learning scorecards.
Information security and technical improvements
Axactor experienced one IT security incident during the first quarter of 2023. A user account utilized by a third-party vendor was compromised, and the account was used to gain access to two citrix servers. The incident was detected at an early stage, and promptly mitigated according to security incident procedures. After analyzing the attack, it was confirmed that there was no data breach, or any other consequences identified.
Multiple new technical enhancements have also been implemented to increase the overall information security layers with focus on remote access, phishing, and data loss prevention. In addition, a new partner has been selected to further enhance the work related to information security awareness, and the execution of internal phishing attempts.
To align and improve IT risk awareness within the Axactor group, the internal IT Risk framework has been updated. The new framework includes a common structure for all Axactor markets, based on core risk-areas that visualize and structures the IT risks. The changes simplify and give an improved overview of the potential IT risks, and the mitigations that are put in place.
Sustainability and governance
On 31 March, Axactor published its Annual report for 2022, including updated sustainability and corporate governance reports. The updated reports shows the significant improvements carried out during 2022. Strong ethical values promoting fair treatment of its stakeholders, to protect reputation and company values, are essential to the Group's success, and are principles upon which Axactor was founded. Axactor aims to continue to contribute to building a viable financial system for people and
the society, through own contributions and by engaging actively with its stakeholders. An increased focus on sustainable growth enables Axactor to not only achieve this, but also to take these advancements and translate them into a competitive advantage. For further details on Axactor's corporate governance and sustainability performance, please see the respective reports included in the Annual report 2022, available at www.axactor.com. The annual general meeting for 2023 was held both physically at Axactor's corporate headquarters in Oslo, and digitally, and took place on 3 May, 2023. The notice for the annual general meeting was published on 31 March.
During the first quarter 2023, Axactor has conducted vendor surveys with a continued focus on sustainable value chains in mind. The surveys focused on ethical business conduct, IT and information security, privacy, and human- and workers' rights. The Group has started the preparations for expected operational changes such as new or changed licenses, reporting obligations and operational organization, that are expected to be introduced in Axactor's countries of operations through the implementation of the NPL directive by the European Union later this year.
As part of its risk management process, Axactor has updated its risk assessments and conducted operational internal controls. An annual plan for the internal audit function for 2023 has been set and the results of audits conducted have been analyzed and are being followed-up. The Bank of Italy has closed a general audit of Axactor Italy Srl, related to compliance with the local 106 license.
No material findings were reported from the audit, although some recommendations were given.
During the quarter, Axactor has also successfully renewed all its group wide insurance policies.
People
Axactor focuses on building a strong corporate culture. Key areas of attention during the first quarter have been performance management, career planning, leadership development, and
fostering a positive and social work environment. Appraisal talks with focus on employee satisfaction and development have been conducted during the quarter. Short term incentive targets for 2023 have been set for all managers, supporting Axactor's strategy and environmental, social and governance related topics. Salaries have been reviewed with focus on equal pay for equal valuable work and to motivate and retain high performers. In Norway a software has been implemented to monitor potential gender pay gaps. The remuneration report for the Group for 2022 and pay gap measures were published in March, included in the Annual report 2022.
/Financials
Revenue
Axactor's operations is split into two business segments: NPL and 3PC. The portfolios of purchased real estate (REO) are in a run-off mode and treated as discontinued operations effective from the fiscal year 2022. All comments and numbers in the following text refer to continuing operations unless explicitly stated otherwise. This also applies to figures for previous periods.
Total income for the first quarter ended at EUR 62.1 million, an 8% increase from the first quarter last year (57.4). Gross revenue increased 5% to EUR 82.8 million (78.5), primarily driven by the NPL investments carried out during 2022. The total income for the quarter includes net NPL revaluations and changes in fair value
Total income for the NPL segment was EUR 49.4 million for the quarter, up from EUR 44.2 million in the first quarter 2022. Gross revenue grew 7% to EUR 70.1 million (65.2), with a collection performance of 98% (100%). The NPL amortization rate fell from 34% to 28%, partially explained by increased average IRR on the portfolios, and partially due to seasonality in the curves. Additionally, net NPL revaluations and changes in fair value forward
flow commitments of combined EUR -0.8 million (0.4) were recognized during the first quarter.
The 3PC segment total income ended at EUR 12.7 million, down 4% from the first quarter 2022 (13.2). The main reason for the decline is the consequences of the strike in the Spanish legal system, but also unfavorable currency movements affected the numbers compared to last year. Excluding Spain, the total 3PC income for the other countries grew by 4%.
Operating expenses
Total operating expenses before depreciation and amortization amounted to EUR 31.7 million for the first quarter, up from EUR 29.7 million in the corresponding quarter last year. The increase is related to higher volume, and the operating expenses as a percentage of gross revenue remained flat at 38%.
Depreciation and amortization – excluding amortization of NPL portfolios – was EUR 2.2 million for the quarter (2.1).
Operating results
Total contribution margin from the business segments was EUR 41.6 million for the quarter, compared to EUR 38.2 million in the first quarter last year. The contribution margin over total income thus remained flat at 67%.
Total income Gross revenue
The NPL segment delivered a contribution margin of EUR 37.6 million in the first quarter, up from EUR 33.7 million in the same quarter last year. The total operating expenses for the NPL segment ended at EUR 11.7 million, up 11% compared to the first quarter 2022 (10.6). EUR 0.2 million of the total operating expenses relates to cost and impairments of repossessed assets sold (0.4). The margin over total income ended at 76%, the same level as for the first quarter 2022.
Contribution from 3PC was EUR 4.0 million, down from EUR 4.5 million in the first quarter 2022. Operating expenses for the segment increased by 1% to EUR 8.8 million (8.7). The margin over total income thus ended at 31% for the quarter (34%).
EBITDA for the first quarter ended at EUR 30.4 million, up from EUR 27.7 million in the same quarter last year. The increase is due to the growth in total income, combined with strict cost control.
The resulting EBITDA margin was 49%, slightly up from 48% in the first quarter 2022.
The difference between contribution margin and EBITDA is comprised of unallocated SG&A and IT costs, which amounted to EUR 11.2 million for the quarter. This compared to EUR 10.5 million in the corresponding quarter 2022.
Cash EBITDA ended at EUR 51.4 million for the first quarter, up 4% from EUR 49.2 million in the corresponding quarter last year. The improvement was mainly driven by the increased gross revenue. Adding the contribution from discontinued operations, cash EBITDA was EUR 52.5 million (53.4).
Operating profit (EBIT) was EUR 28.2 million for the first quarter, compared to EUR 25.6 million in the first quarter last year.
Net financial items
Total net financial items for the quarter were negative EUR 18.3 million (negative 13.4), while total interest expense on borrowings for the quarter was EUR 18.0 million (13.5). The increase is partly attributable to higher gross debt, but also to the increases in EURIBOR, NIBOR and STIBOR compared to the first quarter 2022. Axactor has hedged parts of its interest expenses through an interest rate cap, limiting the effect of the increased interest rates.
Axactor continued to purchase own outstanding bonds in the first quarter, acquiring a total face value of EUR 13.5 million in the quarter. The bonds were acquired at an average price below par. Adding the bonds acquired in 2022, the total face value of treasury bonds is EUR 63.0 million.
The net foreign exchange impact for the quarter was negative EUR 0.4 million, compared to positive EUR 0.2 million in the first quarter last year.
Discontinued operations
Discontinued operations is comprised of the portfolios of real estate assets acquired during 2017 and 2018. It is the operating segment formerly reported as REO, but excluding repossessed assets from Axactor's secured NPL portfolios. Total income for the discontinued operations ended at EUR 1.5 million for the quarter (5.0), while EBITDA ended at EUR -1.4 million (-1.6). The net profit was EUR -1.5 million, compared to EUR -2.0 million in the first quarter 2022. The remaining book value for the REO assets was EUR 5.9 million at the end of the first quarter (20.7). Axactor expect to sell off the remaining assets and close down the business line during 2023.
Earnings and taxes
Earnings before tax ended at EUR 10.0 million for the first quarter (12.2), while net profit ended at EUR 7.7 million (7.7). The effective tax rate was thus 23% for the quarter (37%). The reason for the relatively low tax rate is recognition of deferred tax assets from previous periods in companies that have turned from loss-making into profitable, and that has not previously been recognized in the balance sheet. Adding discontinued operations, the net profit was EUR 6.1 million, up from EUR 5.7 million in the first quarter 2022.
The net profit including discontinued operations for the first quarter ended at EUR 7.2 million for shareholders of the parent company (6.6), and at EUR -1.0 million for non-controlling interests (-1.0). The resulting earnings per share was thus EUR 0.026 both on a reported basis and fully diluted (0.025), based on the average number of shares outstanding in each period.
Cash flow
The following text regarding cash flow includes contribution from both continuing and discontinued operations.
Net cash flow from operating activities, including NPL investments, amounted to EUR 7.3 million (-27.7) for the quarter. The increase compared to last year primarily relates to lower NPL investments. The amount paid for NPL portfolios decreased from EUR 82.8 million in the first quarter 2022 to EUR 35.5 million in the first quarter 2023. The deviation between the investment in NPL portfolios and the cash paid for NPL portfolios in the period relates to deferred payments on certain portfolios.
Excluding investments in portfolios, cash flow from operations for the quarter amounted to EUR 42.9 million (55.2). Cash EBITDA from continuing operations increased to EUR 51.4 million, from EUR 49.2 million in the first quarter last year. The positive development was however partly offset by a EUR 3.1 million reduction in cash EBITDA from the discontinued operations. Taxes paid ended at EUR 2.9 million, up from EUR 1.0 million in the corresponding quarter last year. The net working capital increased by EUR 6.7 million in the first quarter, compared to a decrease of EUR 2.9 million in the first quarter last year.
Total net cash flow from investments, not including investments in NPL portfolios, was EUR -0.8 million for the quarter, compared to EUR -4.3 million in the first quarter 2022. The last year figure includes a EUR 3.1 million cash outflow related to the acquisition of Credit Recovery Service.
Total net cash flow from financing activities was EUR -10.0 million for the quarter (33.8), with a net drawdown on credit facilities of EUR 6.4 million (47.2). Interests paid increased from EUR 11.6 million in the first quarter last year, to EUR 15.5 million. The lower interest paid compared to the interest cost in the net financial items is related to timing differences on recognition of proceeds from the interest rate cap, and amortized loan fees.
Total net cash flow was EUR -3.4 million for the quarter (1.8), leaving total cash and cash equivalents at EUR 35.2 million at the end of the first quarter (46.0). This includes EUR 3.8 million in restricted cash (6.5) and EUR 3.7 million allocated to the discontinued operations (3.6).
Equity position and balance sheet considerations
Total equity for the Group was EUR 403.5 million at the end of the first quarter (394.8), including non-controlling interests of EUR -6.7 million (-1.1). The main reason for the increased equity compared to last year is the profits recognized during the last twelve months.
The resulting equity ratio at the end of the first quarter 2023 was 28%, slightly down from the first quarter last year (29%).
Return on equity
Annualized return on equity for shareholders, including
discontinued operations, ended at 7% for the first quarter (7%), while annualized return on equity for continuing operations ended at 8% (8%).
Looking forward, Axactor will aim for further improvements of key drivers such as economies of scale, changes in the business mix, and accretive portfolio investments. At the same time, the interest rate increases observed recently puts negative pressure on the return on equity development compared to last year.
Capital expenditure and funding
Axactor invested EUR 32.8 million in NPL portfolios during the first quarter (79.6). The invested amount is significantly above the replacement capex and will drive continued growth for the NPL segment. Estimated NPL investment commitments for the remainder of 2023 stand at EUR 42.0 million at the end of the first quarter.
Axactor has two outstanding bond loans, both listed on Oslo Børs with respective tickers ACR02 and ACR03. ACR02 has a nominal value of EUR 200 million and ACR03 has a nominal value of EUR 300 million. Adjusting for the bond buybacks, the outstanding face value of ACR02 and ACR03 is EUR 156.0 million and EUR 281.1 million, respectively. The ACR02 bond is classified as short-term debt, with a maturity of 12 January 2024.
The revolving credit facility has a total size of EUR 545 million, with an additional EUR 75 million accordion option. At the end of the quarter the drawn amount on the revolving credit facility was EUR 518.8 million. The RCF is classified as current interest-bearing debt, with a maturity of 22 December 2023. In April, the revolving credit facility was renewed with a three-year maturity and an option for a further two-year extension contingent on separate credit approval. The new facility is of the same size and a similar structure as the existing agreement, and is made at satisfactory terms.
Total interest-bearing debt including capitalized loan fees and accrued interest amounted to EUR 952.7 million at the end of the first quarter 2023 (888.1), including EUR 8.2 million allocated to discontinued operations (20.0).
Axactor is in compliance with all loan covenants as per the end of the first quarter 2023.
Outlook
The increasing interest rates and macroeconomic uncertainty observed across Europe will continued to have an impact on Axactor's markets going forward. With increasing funding costs for the industry, NPL prices must adjust to compensate for the increased cost of capital. There are relatively few transactions occurring, as some sellers do not appear ready to accept the new market conditions. Axactor sees highly accretive gross IRR levels on the limited volume acquired, with new deals coming in at gross IRR levels north of 25%. This compares to an average for Axactor's back book of 17%. With an expected increase in default rates, Axactor is confident that a new and fair price level will be reached for the broader market, but it might take a few quarters to reach this new equilibrium. The NPL segment will nonetheless continue to see significant revenue growth compared to last year, based on the high investment level in 2022.
The 3PC segment is expected to bounce back to growth in the second quarter 2023, as the strike in the Spanish legal system was called off late March. Debt originators typically choose between outsourcing or selling off their NPLs, and the servicing volume will thus depend on how quickly NPL prices adjust, and how determined debt originators are to offload their balance sheets.
With the renewal of the RCF in April, Axactor has one remaining loan maturity during the next twelve months: the ACR02 bond. EUR 44.1 million of the bond has already been repurchased, and Axactor plan to refinance the remaining EUR 156.0 million during the second or third quarter of 2023.
Axactor still see the operations in Southern Europe performing well, with limited impacts from the high inflation and increasing interest rates over the past year. In the Nordic countries and Germany, there are signs of debtors opting for longer payment plans with lower monthly installments, at the expense of larger settlements. The cash flow from the Nordic bailiffs are also negatively impacted by adjustments to important factors such as debtors' right to an additional payment free month in Finland and a large increase in the monthly amount debtors are entitled to keep in Sweden.
The executive management and Board continue to closely monitor the general macroeconomic situation and its potential business impacts.
/Interim condensed consolidated financial statements
| Interim condensed consolidated statement of profit or loss | 13 |
|---|---|
| Interim condensed consolidated statement of comprehensive income | 14 |
| Interim condensed consolidated statement of financial position | 15 |
| Interim condensed consolidated statement of cash flows | 16 |
| Interim condensed consolidated statement of changes in equity | 17 |
| Notes to the interim condensed consolidated statement | 18 | |
|---|---|---|
| Note 1 | Reporting entity and accounting principles | 18 |
| Note 2 | Financial risks | 18 |
| Note 3 | Operating segments | 20 |
| Note 4 | Financial items | 22 |
| Note 5 | Income | 23 |
| Note 6 | Purchased loan portfolios | 25 |
| Note 7 | Interest-bearing loans and borrowings | 27 |
| Note 8 | Leases | 30 |
| Note 9 | Fair value of forward flow commitments | 31 |
| Note 10 | Issued shares and share capital | 32 |
| Note 11 | Discontinued operations | 33 |
| Note 12 | Events after the reporting period | 35 |
Interim condensed consolidated statement of profit or loss
| For the quarter end / YTD | ||||
|---|---|---|---|---|
| EUR thousand | Note | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 |
| Continuing operations | ||||
| Interest income from purchased loan portfolios | 5, 6 | 51,956 | 43,493 | 187,490 |
| Net gain/(loss) purchased loan portfolios | 5, 6 | -5,087 | -517 | -8,185 |
| Revenue from sale of repossessed assets | 5 | 389 | 1,230 | 4,526 |
| Other operating revenue | 14,849 | 13,212 | 55,846 | |
| Other income | - | 14 | 15 | |
| Total income | 3, 5 | 62,107 | 57,432 | 239,692 |
| Cost of repossessed assets sold, incl impairment | -198 | -396 | -1,496 | |
| Personnel expenses | -16,540 | -15,702 | -64,655 | |
| Other operating expenses Total operating expenses |
-14,971 -31,709 |
-13,641 -29,740 |
-54,587 -120,738 |
|
| EBITDA | 30,399 | 27,693 | 118,955 | |
| Amortization and depreciation | -2,178 | -2,113 | -8,895 | |
| Operating profit | 28,220 | 25,579 | 110,060 | |
| Financial revenue | 4 | 279 | 272 | 3,194 |
| Financial expenses | 4 | -18,544 | -13,632 | -59,061 |
| Net financial items | -18,265 | -13,360 | -55,867 | |
| Profit/(loss) before tax from continuing operations | 9,955 | 12,219 | 54,193 | |
| Income tax expense | -2,303 | -4,567 | -13,549 | |
| Net profit/(loss) after tax from continuing operations | 7,651 | 7,652 | 40,644 |
| For the quarter end / YTD | ||||
|---|---|---|---|---|
| EUR thousand | Note | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 |
| Discontinued operations | ||||
| Net profit/(loss) after tax from discontinued operations | 11 | -1,507 | -1,982 | -8,066 |
| Net profit/(loss) after tax | 6,144 | 5,670 | 32,578 | |
| Attributable to: | ||||
| Non-controlling interests: | ||||
| Net profit/(loss) after tax from continuing operations | -143 | 183 | 489 | |
| Net profit/(loss) after tax from discontinued operations | -901 | -1,143 | -4,668 | |
| Net profit/(loss) after tax | -1,044 | -960 | -4,179 | |
| Shareholders of the parent company: | ||||
| Net profit/(loss) after tax from continuing operations | 7,795 | 7,470 | 40,156 | |
| Net profit/(loss) after tax from discontinued operations | -606 | -839 | -3,399 | |
| Net profit/(loss) after tax | 7,188 | 6,631 | 36,757 | |
| Earnings per share: | ||||
| From continuing operations, basic and diluted: | 0.026 | 0.025 | 0.133 | |
| From continuing and discontinued operations, basic and diluted: | 0.024 | 0.022 | 0.122 |
Interim condensed consolidated statement of comprehensive income
| For the quarter end / YTD | |||
|---|---|---|---|
| EUR thousand | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 |
| Net profit/(loss) after tax | 6,144 | 5,670 | 32,578 |
| Items that will not be reclassified subsequently to profit and loss | |||
| Remeasurement of pension plans | - | - | 238 |
| Net gain/(loss) on equity instruments designated at fair value through OCI | - | - | 16 |
| Items that may be reclassified subsequently to profit and loss | |||
| Foreign currency translation differences - foreign operations | -12,412 | 5,904 | -11,343 |
| Fair value net gain/(loss) on cash flow hedges during the period | - | 3,051 | 9,876 |
| Cumulative net (gain)/loss on cash flow hedges reclassified to profit or loss | -794 | - | -245 |
| Other comprehensive income/(loss) after tax | -13,206 | 8,955 | -1,458 |
| Total comprehensive income/(loss) for the period | -7,062 | 14,625 | 31,120 |
| Attributable to: | |||
| Non-controlling interests | -1,044 | -960 | -4,179 |
| Shareholders of the parent company | -6,018 | 15,585 | 35,299 |
Total equity and liabilities 1,423,222 1,361,130 1,437,778
Interim condensed consolidated statement of financial position
| For the quarter end / YTD | For the quarter end / YTD | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| EUR thousand | Note | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 | EUR thousand | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 | ||
| Assets | Equity and liabilities | |||||||||
| Non-current assets | Equity | |||||||||
| Intangible assets | Share capital | 10 | 158,369 | 158,150 | 158,369 | |||||
| Goodwill | 59,634 | 63,058 | 61,069 | Other paid-in equity | 270,481 | 269,953 | 270,381 | |||
| Deferred tax assets | 8,019 | 12,811 | 5,356 | Retained earnings | 3,489 | -33,845 | -3,699 | |||
| Other intangible assets | 16,097 | 17,512 | 16,617 | Other components of equity | -22,222 | 1,635 | -9,016 | |||
| Non-controlling interests | -6,660 | -1,084 | -5,441 | |||||||
| Tangible assets | Total equity | 403,457 | 394,809 | 410,593 | ||||||
| Property, plant and equipment | 2,292 | 2,440 | 2,372 | |||||||
| Right of use assets | 8 | 11,419 | 11,561 | 11,757 | Non-current liabilities | |||||
| Interest-bearing debt | 7 | 278,339 | 864,444 | 445,590 | ||||||
| Financial assets | Deferred tax liabilities | 8,644 | 11,351 | 6,143 | ||||||
| Purchased loan portfolios | 6 | 1,242,411 | 1,160,374 | 1,252,642 | Lease liabilities | 8 | 9,147 | 9,471 | 9,404 | |
| Other non-current assets | 575 | 3,966 | 607 | Other non-current liabilities | 3,409 | 2,133 | 3,423 | |||
| Total non-current assets | 1,340,447 | 1,271,722 | 1,350,420 | Total non-current liabilities | 299,539 | 887,399 | 464,561 | |||
| Current assets | Current liabilities | |||||||||
| Repossessed assets | 3,310 | 2,667 | 3,230 | Accounts payable | 3,175 | 10,071 | 7,141 | |||
| Accounts receivable | 6,005 | 5,918 | 6,376 | Interest-bearing debt | 7 | 666,166 | 3,737 | 499,709 | ||
| Other current assets | 31,773 | 13,144 | 29,021 | Taxes payable | 17,547 | 17,691 | 17,578 | |||
| Restricted cash | 3,789 | 6,497 | 7,026 | Lease liabilities | 8 | 2,771 | 2,342 | 2,835 | ||
| Cash and cash equivalents | 27,699 | 35,891 | 29,045 | Other current liabilities | 21,938 | 23,936 | 24,741 | |||
| Total current assets | 72,575 | 64,119 | 74,699 | Total current liabilities | 711,598 | 57,776 | 552,005 | |||
| Assets classified as held for sale | 11 | 10,200 | 25,289 | 12,660 | Liabilities directly associated with assets classified as held for sale | 11 | 8,628 | 21,146 | 10,619 | |
| Total assets | 1,423,222 | 1,361,130 | 1,437,778 | Total liabilities | 1,019,765 | 966,321 | 1,027,185 |
Interim condensed consolidated statement of cash flows
| For the quarter end / YTD | |||||
|---|---|---|---|---|---|
| EUR thousand | Note | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 | |
| Operating activities | |||||
| Profit/(loss) before tax from continued operations | 9,955 | 12,219 | 54,193 | ||
| Profit/(loss) before tax from discontinued operations | 11 | -1,507 | -1,982 | -8,066 | |
| Taxes paid | -2,903 | -1,038 | -10,713 | ||
| Adjustments for: | |||||
| Net financial items, continuing operations | 4 | 18,265 | 13,360 | 55,867 | |
| Net financial items, discontinued operations | 153 | 366 | 1,059 | ||
| Portfolio amortization, revaluation and change in forward flow | |||||
| commitments | 20,675 | 21,041 | 97,218 | ||
| Cost of repossessed assets sold, incl impairment | 198 | 396 | 1,496 | ||
| Cost of REOs sold, incl impairment | 11 | 2,517 | 5,889 | 18,318 | |
| Depreciation and amortization | 2,178 | 2,113 | 8,895 | ||
| Calculated cost of employee share options | 100 | 34 | 462 | ||
| Change in working capital | -6,715 | 2,920 | 1,291 | ||
| Cash flow from operating activities before NPL and REO investments | 42,917 | 55,157 | 220,019 | ||
| Purchase of loan portfolios | 6 | -35,537 | -82,826 | -290,816 | |
| Purchases related to REO/repossessed assets | -32 | -49 | -227 | ||
| Net cash flow from operating activities | 7,349 | -27,718 | -71,025 |
| For the quarter end / YTD | ||||
|---|---|---|---|---|
| EUR thousand | Note | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 |
| Investing activities | ||||
| Investment in subsidiaries, net of cash acquired | - | -3,085 | -3,085 | |
| Purchase of intangible and tangible assets | -836 | -1,213 | -4,862 | |
| Interest received | 37 | 14 | 203 | |
| Net cash flow from investing activities | -799 | -4,285 | -7,744 | |
| Financing activities | ||||
| Proceeds from borrowings | 7 | 61,767 | 167,632 | 354,051 |
| Repayment of debt | 7 | -55,337 | -120,412 | -222,001 |
| Interest paid | -15,489 | -11,586 | -51,067 | |
| Loan fees paid | 7 | 0 | -81 | -83 |
| Lease payments, principal amount | 8 | -732 | -683 | -2,755 |
| Repayments to non-controlling interests | -175 | -1,100 | -2,238 | |
| Net cash flow from financing activities | -9,967 | 33,770 | 75,907 | |
| Net change in cash and cash equivalents | -3,417 | 1,766 | -2,861 | |
| Cash and cash equivalents at the beginning of period, incl. | ||||
| restricted cash | 39,679 | 43,953 | 43,953 | |
| Currency translation | -1,044 | 258 | -1,413 | |
| Cash and cash equivalents at end of period, incl. restricted cash | 35,218 | 45,978 | 39,679 |
Interim condensed consolidated statement of changes in equity
| Equity related the shareholders of the parent company | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Restricted | |||||||||
| EUR thousand | Share capital | Other paid in equity | Retained earnings Translation reserve | Cash flow hedge reserve |
Other reserves | Total | Non-controlling interest |
Total equity | |
| Balance on 31 Dec 2021 | 158,150 | 269,919 | -40,475 | -7,074 | -230 | -16 | 380,273 | 976 | 381,249 |
| Result of the period | 6,631 | 6,631 | -960 | 5,670 | |||||
| Other comprehensive income of the period | 5,904 | 3,051 | 8,955 | 8,955 | |||||
| Total comprehensive income for the period | - | - | 6,631 | 5,904 | 3,051 | - | 15,585 | -960 | 14,625 |
| Repayments to non-controlling interests | - | -1,100 | -1,100 | ||||||
| Share-based payment | 34 | 34 | 34 | ||||||
| Balance on 31 Mar 2022 | 158,150 | 269,953 | -33,845 | -1,170 | 2,821 | -16 | 395,893 | -1,084 | 394,809 |
| Result of the period | 30,126 | 30,126 | -3,219 | 26,908 | |||||
| Other comprehensive income of the period | 238 | -17,246 | 6,580 | 16 | -10,413 | -10,413 | |||
| Total comprehensive income for the period | - | - | 30,364 | -17,246 | 6,580 | 16 | 19,714 | -3,219 | 16,495 |
| Repayments to non-controlling interests | - | -1,138 | -1,138 | ||||||
| Share-based payment | 427 | 427 | 427 | ||||||
| Bonus issue | 219 | -219 | - | - | |||||
| Balance on 31 Dec 2022 | 158,369 | 270,381 | -3,699 | -18,417 | 9,401 | - | 416,033 | -5,441 | 410,593 |
| Result of the period | 7,188 | 7,188 | -1,044 | 6,144 | |||||
| Other comprehensive income of the period | -12,412 | -794 | -13,206 | -13,206 | |||||
| Total comprehensive income for the period | - | - | 7,188 | -12,412 | -794 | - | -6,018 | -1,044 | -7,062 |
| Repayments to non-controlling interests | - | -175 | -175 | ||||||
| Share-based payment | 100 | 100 | 100 | ||||||
| Balance on 31 Mar 2023 | 158,369 | 270,481 | 3,489 | -30,829 | 8,607 | - | 410,117 | -6,660 | 403,457 |
Notes to the interim condensed consolidated statement
Note 1 Reporting entity and accounting principles
The parent company Axactor ASA (the Company) is a company domiciled in Norway. These condensed consolidated interim statements ("interim financial statements") comprise the Company and its subsidiaries (together referred to as "the Group"). The Group is primarily involved in debt management, specializing on both purchasing and collection on own portfolios and providing collection services for third-party owned portfolios. The activities are further described in note 3.
This unaudited interim report has been prepared in accordance with IAS 34. The accounting principles applied correspond to those described in the Annual report 2022. This interim report does not contain all the information and disclosures available in the annual report and the interim report should be read together with the Annual report 2022.
In preparing these interim financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual result may differ from these estimates. Significant accounting policies and significant judgements, estimates and assumptions are more comprehensively discussed in the Annual report 2022. The significant judgements made by management applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements. Management continues to assess the data and information available at the reporting date.
Discontinued operations and assets held for sale
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of profit or loss. Assets and liabilities classified as held for sale are presented separately as current items in the consolidated statement of financial position. Assets held for sale, liabilities in disposal groups and income and expenses from discontinued operations are excluded from specifications presented in the notes unless otherwise stated. Comparative figures in statements and notes for March 2022 has been re-presented from the Q1 2022 Report, due to a redefinition of discontinued operations in Q2 2022. Additional disclosures are provided in note 11.
Note 2 Financial risks
All economic activities are associated with risk. Axactor's risks are managed within the Group in accordance with the policies established by the Board. For more information on financial risks and risk management, one is referred to note 3 of the Group's financial statements in the Annual report 2022.
Interest rate risk
The Group holds interest rate caps, a derivative financial instrument with the purpose of reducing the Group's interest rate exposure. On 31 March 2023, the Group holds two interest rate caps with a strike of 0.5% EURIBOR and maturity 15 December 2023. The two contracts hedge the interest risk of EUR 573 million in borrowings, equaling a hedging ratio of 60%. Per 31 March 2023, the fair value of the interest rate hedging derivatives was positive EUR 10.7 million, reported as part of other current receivables in the consolidated statement of financial position.
Liquidity risk
The Group monitors its risk of a shortage of funds using cash flow forecasts regularly. On 31 March 2023, the Group had an unused part of the RCF agreement of EUR 26.2 million and an uncommitted accordion option of EUR 75.0 million, in addition to unrestricted cash and cash equivalents of EUR 31.4 million (including cash related to discontinued operations). The Group had positive cash flow from operating activities before NPL investments of EUR 42.9 million in the first quarter of 2023, and cash flows from operating activities ended at EUR 7.3 million for the quarter.
The table below analyses non-derivative financial liabilities of the Group into relevant maturity groupings based on the remaining period from the balance sheet date to the contractual maturity date (for both continuing and discontinued operations). The contractual maturity is based on the earliest date on which the Group may be required to pay. The amounts
disclosed in the table are the contractual undiscounted cash flows. The table only include liabilities classified as financial instruments, contractual maturities of lease liabilities are presented in note 8. For NPL investment commitments, expected cash flows are presented.
The maturity calculation is made under the assumption that Axactor has a constant revolving credit facility draw in the period. The table includes both interest and principal cash flows. The loan repayment amounts presented are subject to change dependent on changes in variable interest rates. To the extent that interest flows are floating rate, the undiscounted amount is derived from the interest rate curves at the end of the reporting period. When applying the interest rate curves at the end of the reporting period, the Group's interest rate caps are expected to reduce the interest payments for borrowings. The effect of the interest rate caps is hence included in the table below.
The Group's estimated remaining collection for purchased loan portfolios for the next 15 years is presented below the table of contractual maturities (see also note 6). Per 31 March 2023, the Group's estimated collection from purchased loan portfolios exceeds the Group's contractual commitments for all periods presented, with the exception of Q4 2023 which includes repayment of the revolving credit facility and Q1 2024 which includes repayment of bond ACR02. On 18 April 2023, the Group reached an agreement with its banks on all principal terms on renewal of the revolving credit facility, see note 12. The Group also expects to conclude on the refinancing of ACR02 well in advance of the maturity date.
Axactor was compliant with all covenants throughout the first quarter.
| Contractual maturities per 31 Mar 2023 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR thousand | Q2-23 | Q3-23 | Q4-23 | Q1-24 | 1-2 years | 2-4 years | 4+ years | Total | |
| NPL investment commitments, non-cancellable 1 | 27,214 | 3,324 | 2,650 | 1,979 | 665 | - | - | 35,832 | |
| NPL investment commitments, cancellable 1 | - | 4,422 | 4,422 | 2,025 | 1,907 | - | - | 12,776 | |
| Revolving credit facility | 8,558 | 8,979 | 526,751 | - | - | - | - | 544,288 | |
| Bond ACR02 (ISIN: NO0010914666) | 3,950 | 4,217 | 4,276 | 156,670 | - | - | - | 169,113 | |
| Bond ACR03 (ISIN: NO0011093718) | 5,946 | 6,414 | 6,522 | 6,296 | 25,182 | 325,119 | - | 375,477 | |
| Interest rate caps | -2,434 | -3,297 | -3,458 | - | - | - | - | -9,190 | |
| Other non-current liabilities | - | - | - | - | 1,800 | - | 1,610 | 3,409 | |
| Accounts payable | 3,175 | - | - | - | - | - | - | 3,175 | |
| Other current liabilities | 21,525 | - | 800 | - | - | - | - | 22,325 | |
| Total contractual maturities | 67,936 | 24,058 | 541,963 | 166,969 | 29,554 | 325,119 | 1,610 | 1,157,206 |
1 Expected cash flows based on the last three months' actual delivieres. Per 31 March 2023, cash flows are limited to EUR 100.8 million by contracted capex limits. The NPL commitmens that are cancellable are cancellable with three to twelwe months' notice
| ERC per 31 March 2023 | ||||||||
|---|---|---|---|---|---|---|---|---|
| EUR thousand | Q2-23 | Q3-23 | Q4-23 | Q1-24 | 1-2 years | 2-4 years | 4+ years | Total |
| Estimated remaining collection (ERC) | 79,450 | 77,331 | 78,364 | 78,827 | 304,613 | 503,832 | 1,400,382 | 2,522,798 |
Note 3 Operating segments
Axactor delivers credit management services and the Group's revenue is derived from the following two operating segments:
• Non-performing loans (NPL)
• Third-party collection (3PC)
The NPL segment invests in portfolios of non-performing loans, presented as 'Purchased loan portfolios' in the consolidated statement of financial position. Subsequently, the outstanding loans are collected through either amicable or legal proceedings.
The 3PC segment's focus is to perform debt collection services on behalf of third-party clients. The operating segment applies both amicable and legal proceedings to collect the non-performing loans, and normally receive a commission for these services. Other services provided include, amongst others, helping creditors to prepare documentation for future legal proceedings against debtors, handling of invoices between the invoice date and the default date and sending out reminders. For these latter services, Axactor normally receives a fixed fee.
Axactor reports its business through reporting segments which correspond to the operating segments. Segment profitability and country profitability are the two most important dimensions when making strategic priorities and deciding where to allocate the Group's resources. Segment revenue reported represents revenue generated from external customers.
The accounting policies of the reportable segments are the same as the Group's accounting policies described in note 1. Segment contribution margin represents contribution margin earned by each segment without allocation of management fee, central administration costs, other gains and losses and financial items. The measurement basis of the performance of the segment is the segment's contribution margin.
For the quarter end / YTD 31 Mar 2023
| EUR thousand | NPL | 3PC | Eliminations/ Not allocated |
Total |
|---|---|---|---|---|
| Collection on own portfolios | 69,664 | - | - | 69,664 |
| Portfolio amortization and revaluation | -22,794 | - | - | -22,794 |
| Revenue from sale of repossessed assets | 389 | - | - | 389 |
| Other operating income: | ||||
| Change in fair value forward flow commitments | 2,120 | - | - | 2,120 |
| Other operating revenue and other income | - | 12,729 | - | 12,729 |
| Total income | 49,378 | 12,729 | - | 62,107 |
| Cost of repossessed assets sold | -198 | - | - | -198 |
| Impairment repossessed assets | - | - | - | - |
| Direct operating expenses | -11,544 | -8,776 | - | -20,320 |
| Contribution margin | 37,637 | 3,953 | - | 41,590 |
| SG&A, IT and corporate cost | -11,191 | -11,191 | ||
| EBITDA | 30,399 | |||
| Amortization and depreciation | -2,178 | -2,178 | ||
| Operating result | 28,220 | |||
| Total operating expenses | -11,741 | -8,776 | -11,191 | -31,709 |
| Contribution margin (%) | 76.2% | 31.1% | na | 67.0% |
| EBITDA margin (%) | 48.9% | |||
| Opex ex SG&A, IT and corporate cost / Gross revenue | 16.8% | 68.9% | na | 24.8% |
| SG&A, IT and corporate cost / Gross revenue | 13.5% |
For the quarter end / YTD 31 Mar 2022
| EUR thousand | NPL | 3PC | Eliminations/ Not allocated |
Total |
|---|---|---|---|---|
| Collection on own portfolios | 64,017 | - | - | 64,017 |
| Portfolio amortization and revaluation | -21,041 | - | - | -21,041 |
| Revenue from sale of repossessed assets | 1,230 | - | - | 1,230 |
| Other operating income: | ||||
| Change in fair value forward flow commitments | - | - | - | - |
| Other operating revenue and other income | - | 13,212 | 14 | 13,227 |
| Total income | 44,206 | 13,212 | 14 | 57,432 |
| Cost of repossessed assets sold | -396 | - | - | -396 |
| Impairment repossessed assets | - | - | - | |
| Direct operating expenses | -10,157 | -8,668 | - | -18,826 |
| Contribution margin | 33,652 | 4,544 | 14 | 38,211 |
| SG&A, IT and corporate cost | -10,518 | -10,518 | ||
| EBITDA | 27,693 | |||
| Amortization and depreciation | -2,113 | -2,113 | ||
| Operating result | 25,579 | |||
| Total operating expenses | -10,553 | -8,668 | -10,518 | -29,740 |
| Contribution margin (%) | 76.1% | 34.4% | na | 66.5% |
| EBITDA margin (%) | 48.2% | |||
| Opex ex SG&A, IT and corporate cost / Gross revenue | 16.2% | 65.6% | na | 24.5% |
| SG&A, IT and corporate cost / Gross revenue | 13.4% |
Full year 2022
| EUR thousand | NPL | 3PC | Eliminations/ Not allocated |
Total |
|---|---|---|---|---|
| Collection on own portfolios | 276,524 | - | - | 276,524 |
| Portfolio amortization and revaluation | -97,218 | - | - | -97,218 |
| Revenue from sale of repossessed assets | 4,526 | - | - | 4,526 |
| Other operating income: | ||||
| Change in fair value forward flow commitments | - | - | - | - |
| Other operating revenue and other income | - | 55,846 | 15 | 55,861 |
| Total income | 183,831 | 55,846 | 15 | 239,692 |
| Cost of repossessed assets sold | -1,430 | - | - | -1,430 |
| Impairment repossessed assets | -65 | - | - | -65 |
| Direct operating expenses | -41,980 | -34,674 | - | -76,654 |
| Contribution margin | 140,356 | 21,172 | 15 | 161,543 |
| SG&A, IT and corporate cost | -42,588 | -42,588 | ||
| EBITDA | 118,955 | |||
| Amortization and depreciation | -8,895 | -8,895 | ||
| Operating result | 110,060 | |||
| Total operating expenses | -43,475 | -34,674 | -42,588 | -120,738 |
| Contribution margin (%) | 76.4% | 37.9% | na | 67.4% |
| EBITDA margin (%) | 49.6% | |||
| Opex ex SG&A, IT and corporate cost / Gross revenue | 15.5% | 62.1% | na | 23.2% |
| SG&A, IT and corporate cost / Gross revenue | 12.6% |
Note 4 Financial items
| For the quarter end / YTD | ||||
|---|---|---|---|---|
| EUR thousand | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 | |
| Financial revenue | ||||
| Interest on bank deposits | 37 | 14 | 203 | |
| Net foreign exchange gain 1 | - | 246 | 550 | |
| Gain on purchase of bonds in own bond loans (note 7) | 183 | - | 2,349 | |
| Other financial income | 58 | 13 | 91 | |
| Total financial revenue | 279 | 272 | 3,194 | |
| Financial expenses | ||||
| Interest expense on borrowings | -17,984 | -13,463 | -57,902 | |
| Net foreign exchange loss 1 | -379 | - | - | |
| Other financial expenses | -181 | -170 | -1,158 | |
| Total financial expenses | -18,544 | -13,632 | -59,061 | |
| Total net financial items | -18,265 | -13,360 | -55,867 |
1 Foreign exchange gains and losses are presented net as either financial revenue or financial expenses, depending on the net position
The Group started with hedge accounting at the end of 2021, related to the hedging of EUR 200 million in floating rate issued loans for a duration of three years. At the end of 2022, the Group agreed with the counterparties to change the amount and duration of the hedge. The current hedge agreements hedge EUR 573 million in floating rate issued loans for a duration of one year.
As the Group started applying hedge accounting at the end of 2021, and the hedged future cash flows are still expected to occur, the Group is required to apply hedge accounting for the original amount and duration of the agreement, even though the duration has changed. This causes a mismatch between interest paid and interest expensed for the hedge accounting period. For the first quarter of 2023, the hedging reduces interest paid with EUR 1.8 million and interest expensed with EUR 1.0 million. There is hence a timing difference from hedge accounting, where interest expensed on borrowings is reduced by EUR 0.8 million less than interest paid on borrowings for the first quarter.
Note 5 Income
The Group delivers credit management services in six European countries: Finland, Germany, Italy, Norway, Spain and Sweden. Axactor also owns some portfolios through entities based in Luxembourg.
The Group's income from continuing operations from external customers by location of operations and information about its non-current assets by location of assets are detailed below.
The information in the table presented is based on the location of the debtors and the country of the company performing the collection (which correspond). This is not necessarily the same as the country owning the portfolio. The same principle is used for the allocation of the non-current assets. Non-current assets presented in the table consists of intangible assets, goodwill, property, plant and equipment and right of use assets.
Total income
| For the quarter end / YTD | |||
|---|---|---|---|
| EUR thousand | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 |
| Finland | 3,701 | 3,850 | 16,100 |
| Germany | 9,718 | 7,871 | 35,112 |
| Italy | 8,620 | 6,354 | 28,574 |
| Norway | 11,828 | 12,023 | 40,862 |
| Spain | 22,349 | 19,931 | 91,029 |
| Sweden | 5,892 | 7,404 | 28,016 |
| Total income | 62,107 | 57,432 | 239,692 |
Non-current assets
| For the quarter end / YTD | ||||
|---|---|---|---|---|
| EUR thousand | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 | |
| Finland | 3,610 | 3,911 | 3,747 | |
| Germany | 15,787 | 15,727 | 15,894 | |
| Italy | 15,953 | 16,135 | 16,039 | |
| Norway | 31,190 | 36,585 | 33,068 | |
| Spain | 19,912 | 18,190 | 19,883 | |
| Sweden | 2,990 | 4,023 | 3,185 | |
| Total assets | 89,441 | 94,571 | 91,816 | |
Portfolio revenue
Portfolio revenue consists of interest income from purchased loan portfolios, net gain/(loss) from purchased loan portfolios and revenue from sale of repossessed assets. Net gain/(loss) from purchased loan portfolios is split into collection above/(below) collection forecasts and net present value of changes in collection forecasts.
| For the quarter end / YTD |
|||||||
|---|---|---|---|---|---|---|---|
| EUR thousand | Finland Germany | Italy Norway | Spain Sweden | 31 Mar 2023 | |||
| Interest income from purchased loan portfolios | 3,965 | 9,208 | 5,787 | 9,345 | 17,098 | 6,554 | 51,956 |
| Collection above/(below) forecasts | -406 | -1,352 | 256 | -1,112 | 999 | -510 | -2,125 |
| NPV of changes in collection forecasts | -38 | -104 | 91 | -21 | -2,264 | -626 | -2,962 |
| Net gain/(loss) purchased loan portfolios | -444 | -1,456 | 347 | -1,133 | -1,265 | -1,137 | -5,087 |
| Sale of repossessed assets | 389 | 389 | |||||
| Change in fair value forward flow commitments | 2,120 | 2,120 | |||||
| Total portfolio revenue | 3,521 | 7,753 | 6,134 | 10,332 | 16,222 | 5,417 | 49,378 |
| EUR thousand | Finland Germany | Italy Norway | Spain Sweden | Full year 2022 |
|||
|---|---|---|---|---|---|---|---|
| Interest income from purchased loan portfolios | 14,962 | 29,700 | 19,081 | 39,464 | 56,266 | 28,017 | 187,490 |
| Collection above/(below) forecasts | 463 | -3,784 | -33 | -3,130 | 1,023 | -88 | -5,550 |
| NPV of changes in collection forecasts | -15 | 790 | 239 | -1,847 | 685 | -2,487 | -2,635 |
| Net gain/(loss) purchased loan portfolios | 448 | -2,994 | 206 | -4,976 | 1,708 | -2,576 | -8,185 |
| Sale of repossessed assets | 4,526 | 4,526 | |||||
| Total | 15,410 | 26,705 | 19,287 | 34,487 | 62,500 | 25,442 | 183,831 |
| EUR thousand | Finland Germany | Italy Norway | Spain Sweden | For the quarter end / YTD 31 Mar 2022 |
|||
|---|---|---|---|---|---|---|---|
| Interest income from purchased loan portfolios | 3,590 | 6,332 | 4,142 | 9,765 | 12,438 | 7,227 | 43,493 |
| Collection above/(below) forecasts | - 172 |
- -700 |
- 151 |
- 385 |
- -742 |
- -209 |
- -944 |
| NPV of changes in collection forecasts | -56 | 282 | 45 | 161 | 100 | -106 | 426 |
| Net gain/(loss) purchased loan portfolios | 117 | -418 | 196 | 546 | -643 | -315 | -517 |
| Sale of repossessed assets | - | - | - | - | 1,230 | - | 1,230 |
| Total portfolio revenue | 3,706 | 5,914 | 4,337 | 10,311 | 13,025 | 6,912 | 44,206 |
Note 6 Purchased loan portfolios
Purchased loan portfolios consists of portfolios of delinquent consumer debts purchased significantly below nominal value, reflecting incurred and expected credit losses, and thus defined as credit impaired. For purchased loan portfolios, timely collection of principal and interest is no longer reasonably assured at the date of purchase. Purchased loan portfolios are recognized at fair value at the date of purchase. Since the loans are measured at fair value, which includes an estimate of future credit losses, no allowance for credit losses is recorded on the day of acquisition of the loans. The loans are subsequently measured at amortized cost according to a credit adjusted effective interest rate.
Since the delinquent consumer debts are a homogenous group, the future cash flows are projected on a portfolio basis except for secured portfolios, for which cash flows are projected on a collateral asset basis. The majority of the purchased loan portfolios are unsecured, whereas approximately 5% of the book value of the loans are secured by a property object per 31 March 2023.
The carrying amount of each portfolio is determined by projecting future cash flows discounted to present value using the credit adjusted effective interest rate as at the date the portfolio was acquired. The total cash flows (both principal and interest) expected to be collected on purchased credit impaired loans are regularly reviewed. Changes in expected cash flows are adjusted in the carrying amount and are recognized in the profit or loss as income or expense in 'Net gain/ (loss) purchased loan portfolios'. Interest revenue is recognized using a credit adjusted effective interest rate, included in 'Interest revenue from purchased loan portfolios'.
The estimation of future cash flows is affected by several factors, including general macro factors, market specific factors, portfolio specific factors and internal factors. Axactor has incorporated into the estimated remaining collection the effect of the economic factors and conditions that is expected to influence collections going forward. Scenarios have been used to consider possible non-linear relationships between macroeconomic factors and collection.
For more information on accounting principles and a description of significant accounting judgments, estimates and assumptions related to purchased loan portfolios, see note 2.12.2 and note 4 in the Group's Annual report 2022.
| For the quarter end / YTD | |||
|---|---|---|---|
| EUR thousand | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 |
| Balance at start of period | 1,252,642 | 1,095,789 | 1,095,789 |
| Acquisitions during the period | 32,818 | 79,617 | 288,052 |
| Collection | -69,664 | -64,017 | -276,524 |
| Interest income from purchased loan portfolios | 51,956 | 43,493 | 187,490 |
| Net gain/(loss) purchased loan portfolios | -5,087 | -517 | -8,185 |
| Repossessions | -245 | -304 | -1,925 |
| Deliveries on forward flow contracts | 0 | -409 | -409 |
| Currency translation differences | -20,009 | 6,723 | -31,646 |
| Balance at end of period | 1,242,411 | 1,160,374 | 1,252,642 |
Acquisitions during the period can be split into nominal value of the acquired portfolios and expected credit losses at acquisition as follows:
| For the quarter end / YTD | ||||
|---|---|---|---|---|
| EUR thousand | 31 Mar 2023 | Full year 2022 | ||
| Nominal value acquired portfolios | 87,035 | 200,715 | 2,429,169 | |
| Expected credit losses at acquisition | -54,217 | -121,098 | -2,141,117 | |
| Credit impaired acquisitions during the period | 32,818 | 79,617 | 288,052 | |
The payments during the period for investments in loan portfolios presented in the consolidated statement of cash flow will not correspond to acquisitions during the period due to deferred payments.
The ERC represents the estimated gross collection on the purchased loan portfolios. The ERC, amortization, and interest income from purchased loan portfolios can be broken down per year as follows (year 1 means the first 12 months from the reporting date):
| EUR thousand | Estimated remaining collection (ERC), amortization and interest income from purchased loan portfolios per year | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | Total |
| 31 Mar 2023 | ||||||||||||||||
| ERC | 313,971 | 304,613 | 266,427 | 237,405 | 209,077 | 184,254 | 165,362 | 149,805 | 135,499 | 123,423 | 112,448 | 96,462 | 83,392 | 74,075 | 66,585 | 2,522,798 |
| Amortization | 117,803 | 131,133 | 115,153 | 105,102 | 93,732 | 83,194 | 76,853 | 72,944 | 69,713 | 68,299 | 67,841 | 62,147 | 58,600 | 58,788 | 61,108 | 1,242,411 |
| Interest income | 196,168 | 173,480 | 151,274 | 132,303 | 115,345 | 101,061 | 88,509 | 76,862 | 65,786 | 55,123 | 44,606 | 34,315 | 24,793 | 15,286 | 5,477 | 1,280,387 |
| 31 Mar 2022 | ||||||||||||||||
| ERC | 290,903 | 278,755 | 246,589 | 215,891 | 188,085 | 164,488 | 147,115 | 132,351 | 119,229 | 106,801 | 96,539 | 86,867 | 72,420 | 60,725 | 51,928 | 2,258,684 |
| Amortization | 117,287 | 125,716 | 114,241 | 101,165 | 88,713 | 78,120 | 72,015 | 67,699 | 64,412 | 61,324 | 60,046 | 59,210 | 53,262 | 49,217 | 47,945 | 1,160,374 |
| Interest income | 173,616 | 153,039 | 132,347 | 114,725 | 99,371 | 86,368 | 75,100 | 64,652 | 54,817 | 45,476 | 36,494 | 27,657 | 19,158 | 11,508 | 3,983 | 1,098,310 |
| Full year 2022 | ||||||||||||||||
| ERC | 310,027 | 305,914 | 271,347 | 237,417 | 212,308 | 185,750 | 168,327 | 152,172 | 137,607 | 124,971 | 113,833 | 99,900 | 84,323 | 74,817 | 66,705 | 2,545,419 |
| Amortization | 113,530 | 130,485 | 118,518 | 103,930 | 95,595 | 83,424 | 78,622 | 74,325 | 71,027 | 69,190 | 68,662 | 65,230 | 59,403 | 59,493 | 61,207 | 1,252,642 |
| Interest income | 196,496 | 175,428 | 152,829 | 133,487 | 116,714 | 102,326 | 89,705 | 77,847 | 66,581 | 55,781 | 45,171 | 34,670 | 24,921 | 15,324 | 5,498 | 1,292,777 |
The book value per market is presented in the table below:
| Book value | ||||||
|---|---|---|---|---|---|---|
| EUR thousand | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 | |||
| Finland | 121,424 | 113,708 | 121,300 | |||
| Germany | 189,923 | 141,675 | 179,654 | |||
| Italy | 148,864 | 141,723 | 147,678 | |||
| Norway | 228,064 | 261,485 | 243,468 | |||
| Spain | 353,425 | 276,562 | 357,137 | |||
| Sweden | 200,712 | 225,220 | 203,405 | |||
| Total book value | 1,242,411 | 1,160,374 | 1,252,642 |
Note 7 Interest-bearing loans and borrowings
The Group's total loans and borrowings, attributable to both continuing and discontinued operations, are as follows:
| EUR thousand | Currency | Facility limit | Nominal value | Treasury bonds | Capitalized loan fees |
Accrued interest | Carrying amount, EUR |
Interest coupon | Maturity |
|---|---|---|---|---|---|---|---|---|---|
| Facility | |||||||||
| Bond ACR02 (ISIN: NO0010914666) | EUR | 200,000 | -44,050 | -1,427 | 3,137 | 157,660 | 3m EURIBOR+700bps | 12/01/2024 | |
| Bond ACR03 (ISIN: NO0011093718) | EUR | 300,000 | -18,950 | -2,712 | 1,038 | 279,376 | 3m EURIBOR+535bps | 15/09/2026 | |
| Total bond loans | 500,000 | -63,000 | -4,138 | 4,175 | 437,036 | ||||
| Revolving credit facility | EUR | 259,158 | -3,095 | 49 | 256,111 | EURIBOR+ margin | 22/12/2023 | ||
| (multiple currency facility) | NOK | 108,543 | 108,543 | NIBOR+ margin | 22/12/2023 | ||||
| SEK | 151,055 | 151,055 | STIBOR+ margin | 22/12/2023 | |||||
| Total credit facilities | 545,000 | 518,756 | -3,095 | 49 | 515,709 | ||||
| Total loans and borrowings at end of period | 1,018,756 | -63,000 | -7,233 | 4,223 | 952,746 |
For information on renewal of the revolving credit facility, see events after the reporting period in note 12.
Of the total borrowings per 31 March 2023, EUR 278.3 million is classified as non-current and EUR 674.4 million is classified as current. Discontinued operations have EUR 8.2 million in current borrowings (note 11). All borrowings in discontinued operations are denominated in EUR.
Change in loans and borrowings from financial activities
| EUR thousand | Bond loans | Credit facilities | Total Borrowings |
|---|---|---|---|
| Balance on 1 Jan | 449,648 | 505,899 | 955,546 |
| Proceeds from loans and borrowings | - | 61,767 | 61,767 |
| Repayment of loans and borrowings | -13,500 | -41,837 | -55,337 |
| Loan fees | - | - | - |
| Total changes in financial cash flow | -13,500 | 19,930 | 6,430 |
| Change in accrued interest | 118 | -8 | 111 |
| Amortization of capitalized loan fees | 772 | 1,139 | 1,910 |
| Currency translation differences | - | -11,252 | -11,252 |
| Total loans and borrowings at end of period | 437,036 | 515,709 | 952,746 |
Change in lease liabilities are presented in note 8.
Maturity
The maturity calculation is made under the assumption that no new portfolios are acquired, and the revolving credit facility draw is constant to maturity date.
| Estimated future cash flow within | |||||||
|---|---|---|---|---|---|---|---|
| Currency | Carrying amount | Total estimated future cash flow |
6 months or less | 6-12 months | 1-2 years | 2-5 years | |
| Bond ACR02 (ISIN: NO0010914666) | EUR | 157,660 | 169,113 | 8,166 | 160,946 | 0 | 0 |
| Bond ACR03 (ISIN: NO0011093718) | EUR | 279,376 | 375,478 | 12,360 | 12,817 | 25,182 | 325,119 |
| Total bond loan | 437,036 | 544,591 | 20,527 | 173,764 | 25,182 | 325,119 | |
| Revolving credit facility (multiple currency facility) | EUR/NOK/SEK | 515,709 | 544,288 | 17,537 | 526,751 | 0 | 0 |
| Total credit facilities | 515,709 | 544,288 | 17,537 | 526,751 | 0 | 0 | |
| Total loans and borrowings at end of period | 952,746 | 1,088,879 | 38,064 | 700,515 | 25,182 | 325,119 |
Bond ACR02
The bond was placed at 3m EURIBOR + 7% interest, with maturity date 12 January 2024. The bond is listed on Oslo Børs (ISIN: NO0010914666).
The following financial covenants apply:
- Interest coverage ratio: >4.0x (Pro-forma adjusted cash EBITDA to net interest expenses)
- Leverage ratio: <4.0x (NIBD to pro-forma adjusted cash EBITDA)
- Net loan to value: <75% (NIBD to total book value all loan portfolios and REOs)
- Net secured loan to value: <65% (secured loans less cash to total book value all loan portfolios and REOs)
Trustee: Nordic Trustee
Bond ACR03
The bond was placed at 3m EURIBOR + 5.35% interest, with maturity date 15 September 2026. The bond is listed on Oslo Børs (ISIN: NO0011093718).
The following financial covenants apply:
- Interest coverage ratio: >4.0x (Pro-forma adjusted Cash EBITDA to net interest expenses)
- Leverage ratio: <4.0x (NIBD to pro-forma adjusted cash EBITDA)
- Net loan to value: <80% (NIBD to total book value all loan portfolios and REOs)
- Net secured loan to value: <65% (secured loans less cash to total book value all loan portfolios and REOs)
Trustee: Nordic Trustee
During 2023 the Group has repurchased EUR 13.5 million of outstanding bonds. On 31 March 2023, the Group holds treasury bonds with a nominal value of EUR 63.0 million, split between EUR 44.0 million in ACR02 (ISIN NO 0010914666) and EUR 19.0 million in ACR03 (ISIN NO 0011093718).
Revolving credit facility DNB/Nordea
The revolving credit facility consists of EUR 545 million in a multicurrency facility, with an addition of 75 million in the form of accordion option. The loan carries a variable interest rate based on the interbank rate in each currency with a margin. The maturity date for the facility is 22 December 2023.
The following financial covenants apply:
- NIBD ratio to pro-forma adjusted cash EBITDA < 3:1 (secured loans (RCF) less cash to pro-forma adjusted cash EBITDA L12M)
- Portfolio loan to value ratio < 60% (NIBD to total book value of loan portfolios)
- Portfolio collection performance > 90% (actual portfolio performance
- L6M to active forecast L6M)
- Parent loan to value < 80% (total loans for the Group less cash to total book value of all loan portfolios and REOs) margin.
All subsidiaries of the Group, except Reolux Holding Sarl, are guarantors and have granted a share pledge and bank account pledge as part of the security package for this facility.
Note 8 Leases
Right of use assets
| EUR thousand | Buildings | Vehicles | Other | Total |
|---|---|---|---|---|
| Right of use assets on 31 Dec 2021 | 10,247 | 475 | 46 | 10,768 |
| Additions | 1,456 | 51 | - | 1,507 |
| Depreciation | -573 | -86 | -3 | -662 |
| Disposals | -48 | -3 | - | -51 |
| Currency translation differences | -2 | - | -1 | -2 |
| Right of use assets on 31 Mar 2022 | 11,080 | 439 | 42 | 11,561 |
| Additions | 2,838 | 287 | 69 | 3,193 |
| Depreciation | -2,096 | -300 | -15 | -2,411 |
| Disposals | -250 | -21 | - | -271 |
| Currency translation differences | -309 | -4 | -3 | -315 |
| Right of use assets on 31 Dec 2022 | 11,263 | 401 | 93 | 11,757 |
| Additions | 232 | 441 | - | 673 |
| Depreciation | -684 | -85 | -8 | -778 |
| Disposals | -34 | - | - | -34 |
| Currency translation differences | -198 | -1 | - | -200 |
| Right of use assets on 31 Mar 2023 | 10,579 | 755 | 84 | 11,419 |
| Remaining lease term | 1-9 years | 1-3 years | 2-5 years | |
| Depreciation method | Linear | Linear | Linear |
Lease liabilities
| EUR thousand | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 |
|---|---|---|---|
| Lease liabilities on 1 Jan | 12,239 | 11,051 | 11,051 |
| Net new leases | 620 | 1,447 | 4241 |
| Lease payments, principal amount | -732 | -683 | -2,755 |
| Currency translation differences | -209 | -2 | -297 |
| Lease liabilities at period end | 11,918 | 11,813 | 12,239 |
| Current | 2,771 | 2,342 | 2,835 |
| Non-current | 9,147 | 9,471 | 9,404 |
The future aggregated minimum lease payments under lease liabilities are as follows:
| EUR thousand | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 |
|---|---|---|---|
| Undiscounted lease liabilities and maturity of cash outflows | |||
| < 1 year | 3,364 | 2,970 | 3,441 |
| 1-2 years | 3,167 | 2,735 | 3,015 |
| 2-3 years | 2,696 | 2,297 | 2,620 |
| 3-4 years | 2,269 | 2,061 | 2,464 |
| 4-5 years | 544 | 1,844 | 822 |
| > 5 years | 1,629 | 1,932 | 1,745 |
| Total undiscounted lease liabilities | 13,669 | 13,839 | 14,106 |
| Discounting element | -1,751 | -2,026 | -1,866 |
| Total lease liabilities | 11,918 | 11,813 | 12,239 |
Note 9 Fair value of forward flow commitments
Changes in the fair value of forward flow commitments are shown below. For additional information, see note 2.12.2 in the Group's Annual report 2022.
| 31 Mar 2023 | 31 Mar 2022 | Full year 2022 |
|---|---|---|
| - | -409 | -409 |
| - | 409 | 409 |
| 2,120 | - | - |
| -10 | - | - |
| 2,110 | - | - |
The changes in fair value of forward flow commitments are included in 'Other current assets' in the consolidated statement of financial position;
| EUR thousand | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 |
|---|---|---|---|
| Fair value of forward flow commitments (asset) | 2,110 | - | - |
| Balance at period end | 2,110 | - | - |
Note 10 Issued shares and share capital
Issued shares and share capital
| Number of shares | Share capital (EUR) | |
|---|---|---|
| On 31 Dec 2021 | 302,145,464 | 158,149,942 |
| Bonus issue | 218,961 | |
| On 31 Dec 2022 | 302,145,464 | 158,368,903 |
| On 31 Mar 2023 | 302,145,464 | 158,368,902 |
Shares owned by the Board and Group executive management on 31 Mar 2023
| Name | Shareholding | Share % |
|---|---|---|
| Latino Invest AS 1 | 1,040,000 | 0.3% |
| Johnny Tsolis Vasili 1, 4 | 670,000 | 0.2% |
| Terje Mjøs Holding AS 3 | 500,000 | 0.2% |
| Robin Knowles 2, 5 | 352,921 | 0.1% |
| Vibeke Ly 2 | 203,750 | 0.1% |
| Arnt Andre Dullum 2 | 162,000 | 0.1% |
| Nina Mortensen 2 | 160,000 | 0.1% |
| Kyrre Svae 2 | 150,000 | 0.0% |
| Karl Mamelund 6 | 150,000 | 0.0% |
| Brita Eilertsen 3 | 19,892 | 0.0% |
1 CEO/related to the CEO of Axactor ASA
2 Member of the Group executive management
3 Member of the Board/controlled by member of the Board
4 Holds 300 000 call options that will be settled in cash on 22 June 2023
5 Robin Knowles was part of the Group executive management until 1 April 2023
6 Karl Mamelund is part of the Group executive management from 1 April 2023
20 largest shareholders on 31 Mar 2023
| Name | Shareholding | Share % |
|---|---|---|
| Geveran Trading Co Ltd | 142,371,300 | 47.1% |
| Torstein Ingvald Tvenge | 10,000,000 | 3.3% |
| Ferd AS | 7,864,139 | 2.6% |
| Skandinaviska Enskilda Banken AB | 5,500,000 | 1.8% |
| Skandinaviska Enskilda Banken AB (Nominee) | 5,279,467 | 1.7% |
| Verdipapirfondet Nordea Norge Verdi | 4,454,162 | 1.5% |
| Nordnet Livsforsikring AS | 2,561,239 | 0.8% |
| Endre Rangnes | 2,017,000 | 0.7% |
| Gvepseborg AS | 2,009,694 | 0.7% |
| Stavern Helse og Forvaltning AS | 2,000,000 | 0.7% |
| Alpette AS | 1,661,643 | 0.5% |
| Klotind AS | 1,532,704 | 0.5% |
| Velde Holding AS | 1,500,000 | 0.5% |
| Masani AS | 1,400,000 | 0.5% |
| David Martin Ibeas | 1,177,525 | 0.4% |
| Andres Lopez Sanchez | 1,177,525 | 0.4% |
| Latino Invest AS | 1,040,000 | 0.3% |
| Verdipapirfondet Nordea Avkastning | 1,035,709 | 0.3% |
| Verdipapirfondet Storebrand Norge | 1,000,000 | 0.3% |
| Herman Alfred Brenaas | 970,000 | 0.3% |
| Total 20 largest shareholders | 196,552,107 | 65.1% |
| Other shareholders | 105,593,357 | 34.9% |
| Total number of shares | 302,145,464 | 100% |
| Total number of shareholders | 9,684 |
Note 11 Discontinued operations
The Board resolved to dispose of the Group's real estate owned (REO) operating segment from 1 January 2022. The REO segment consisted of portfolios of purchased real estate and repossessed assets from secured loan portfolios. In the first quarter of 2022, both portfolios of purchased real estate and repossessed assets from secured nonperforming loans were presented as discontinued operations in line with the Board's resolution. In the second quarter of 2022, it was resolved that it is only the portfolios of purchased real estate that shall be classified as discontinued operations. Assets repossessed from secured loan portfolios prior to 2022 are thus presented as continuing operations, and the Group will also continue with repossessions from secured loan portfolios going forward.
The disposal of portfolios of purchased real estate is consistent with the Group's long-term policy to focus its activities on the Group's other operating segments. These operations, which were expected to be sold within 12 months, have been classified as a disposal group held for sale and presented separately in the statement of financial position. The proceeds of disposal were expected to equal the carrying amount of the related net assets and accordingly no impairment losses have been recognized on the classification of these operations as held for sale.
As per 31 March 2023, the Group is still pursuing a buyer for the assets classified as held for sale. Negotiations with several interested parties have taken place, but the Group has not reached an agreement at the reporting date. With rising inflation, rising interest rates and a weakened economy during 2022 and beginning of 2023, the market conditions that existed at the date the assets were classified initially as held for sale has deteriorated, and as a result the assets are not sold. During this period, the Group has actively solicited but not received any reasonable offers to purchase the assets. The Group has impaired the assets by EUR 0.8 million in 2022. The assets continue to be actively marketed at a price that is reasonable given the change in market condition and is hence classified as held for sale on 31 March 2023.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between continuing operations and discontinued operations are eliminated in the consolidated financial statements. The elimination of the intragroup transactions seeks to portray the results of the continuing operations after the disposal. The discontinued operation has intragroup debt related to their operations. To seek to portray the results of the continuing operations after disposal, the intragroup receivable with corresponding interest income related to discontinued operations is eliminated within continuing operations. The same applies for intragroup debt and corresponding interest expense, taking minority interest into account and capped according to the cash flow the parent company expects to receive from the asset values in the discontinued operations. The rest of the intragroup debt is eliminated within discontinued operations. A part of the Group's total debt and interest expense are hence retained in discontinued operations, as this debt is considered to be directly associated with the discontinued operations. The net assets directly associated with the assets classified as held for sale represents minority interests in the discontinued operations
The results of the discontinued operations, which have been included in net profit/(loss) after tax, were as follows:
| For the quarter end / YTD | |||
|---|---|---|---|
| EUR thousand | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 |
| Other operating revenue | 1,543 | 5,042 | 14,113 |
| Total income | 1,543 | 5,042 | 14,113 |
| Cost of REOs sold, incl impairment | -2,517 | -5,889 | -18,318 |
| Other operating expenses | -380 | -768 | -2,803 |
| Total operating expenses | -2,897 | -6,658 | -21,121 |
| EBITDA | -1,354 | -1,616 | -7,008 |
| Amortization and depreciation | - | - | - |
| Operating profit | -1,354 | -1,616 | -7,008 |
| Financial expenses | -153 | -366 | -1,059 |
| Net financial items | -153 | -366 | -1,059 |
| Profit/(loss) before tax | -1,507 | -1,982 | -8,066 |
| Income tax expense | - | - | - |
| Net profit/(loss) after tax | -1,507 | -1,982 | -8,066 |
| Attributable to: | |||
| Non-controlling interests | -901 | -1,143 | -4,668 |
| Shareholders of the parent company | -606 | -839 | -3,399 |
| Earnings per share: basic and diluted | -0.002 | -0.003 | -0.011 |
The major classes of assets and liabilities comprising the operations classified as held for sale were as follows:
| EUR thousand | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 |
|---|---|---|---|
| Current assets | |||
| Stock of secured assets | 5,901 | 20,710 | 8,418 |
| Accounts receivable | 99 | 566 | 116 |
| Other current assets | 469 | 424 | 518 |
| Cash and cash equivalents | 3,731 | 3,589 | 3,607 |
| Total current assets | 10,200 | 25,289 | 12,660 |
| Assets classified as held for sale | 10,200 | 25,289 | 12,660 |
| Non-current liabilities | |||
| Interest-bearing debt | - | 19,950 | - |
| Total non-current liabilities | - | 19,950 | - |
| Current liabilities | |||
| Interest-bearing debt | 8,241 | - | 10,247 |
| Other current liabilities | 387 | 1,196 | 373 |
| Total current liabilities | 8,628 | 1,196 | 10,619 |
| Liabilities directly associated with assets classified as held for sale | 8,628 | 21,146 | 10,619 |
| Net assets classified as held for sale | 1,572 | 4,143 | 2,041 |
The net cash flows incurred by the operations classified as held for sale were as follows:
| For the quarter end / YTD | |||
|---|---|---|---|
| EUR thousand | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 |
| Net cash flow from operating activities | 1,163 | 3,191 | 11,310 |
| Net cash flow from investing activities | - | - | - |
| Net cash flow from financing activities | -1,049 | -4,120 | -12,220 |
| Total net cash flow | 114 | -929 | -910 |
Note 12 Events after the reporting period
In April 2023, Axactor announced the renewal of its revolving credit facility (RCF) for a new three-year maturity, with an option for a further two-year extension contingent on separate credit approval. The existing agreement has a maturity in December 2023 and is thus classified as current interest-bearing debt in the consolidated statement of financial position. The new facility is of the same size and a similar structure as the existing agreement and is made at satisfactory terms.
On 3 May 2023, the annual general meeting elected Terje Mjøs as chair of the Board. Terje Mjøs previously held the position as director of the Board. Kjersti Høklingen was elected as a new Board director, whereas Brita Eilertsen and Lars-Erich Nilsen were re-elected as directors of the Board for another term.
/ Alternative performance measures
Alternative performance measures (APMs) used in Axactor
| APM | Definition | Purpose of use | Reconciliation IFRS |
|---|---|---|---|
| Gross revenue | Total income plus portfolio amortizations and revaluations, and change in fair value of forward flow commitments |
To review the revenue before split into interest and amortization (for own portfolios) |
Total income from consolidated statement of profit or loss plus portfolio amortizations and revaluations in the consolidated statement of cash flows and change in fair value of forward flow commitments |
| Cash EBITDA from continuing operations | EBITDA adjusted for calculated cost of share option program, portfolio amortization, revaluation and change in forward flow commitments and repossessed assets cost of sale and impairment |
To reflect cash from continuing operating activities, excluding timing of taxes paid and movement in working capital |
EBITDA from continuing operations (total income minus total operating expenses) in consolidated statement of profit or loss adjusted for specified elements from the consolidated statement of cash flows |
| Cash EBITDA | Cash EBITDA from continuing operations plus EBITDA from discontinued operations, adjusted for REO cost of sale, including impairment |
To reflect cash from continuing and discontinued operating activities, excluding timing of taxes paid and movement in working capital |
EBITDA from continuing operations (total income minus total operating expenses) in consolidated statement of profit or loss plus EBITDA from discontinued operations according to note 11, adjusted for specified elements from the consolidated statement of cash flows |
| Estimated remaining collection (ERC) | Estimated remaining collection express the expected future cash collection on purchased loan portfolios in nominal values, over the next 180 months. The ERC does not include sale of repossessed assets if the assets are already repossessed |
ERC is a standard APM within the industry with the purpose to illustrate the future cash collection including estimated interest income and opex |
Purchased loan portfolios from the consolidated statement of financial position |
| Net interest-bearing debt (NIBD) | Net interest-bearing debt means the aggregated amount of interest-bearing debt attributable to both continuing and discontinued operations, less aggregated amount of unrestricted cash and cash equivalents, on a consolidated basis |
NIBD is used as an indication of the Group's ability to pay off all of its debt |
Non-current and current portion of interest-bearing debt and cash and cash equivalents from the consolidated statement of financial position and as attributable to discontinued operations according to note 11, adjusted for capitalized loan fees and accrued interest according to note 7 |
| Return on equity to shareholders, annualized | Net profit/(loss) after tax from continuing and discontinued operations attributable to shareholders divided by average equity for the period attributable to shareholders, annualized |
Measures the profitability in relation to shareholders' equity | Net profit/(loss) after tax attributable to shareholders of the parent company from the consolidated statement of profit or loss and equity attributable to shareholders from the consolidated statement of changes in equity |
| Return on equity, continuing operations, annualized |
Net profit/(loss) after tax from continuing operations divided by average total equity for the period, annualized |
Measures the profitability of continuing operations in relation to total equity. |
Net profit/(loss) after tax from continuing operations from the consolidated statement of profit or loss and total equity from the consolidated statement of changes in equity |
Gross revenue
| For the quarter end / YTD | |||
|---|---|---|---|
| EUR thousand | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 |
| Total income | 62,107 | 57,432 | 239,692 |
| Portfolio amortizations and revaluations | 22,794 | 21,041 | 97,218 |
| Change in fair value of forward flow commitments | -2,120 | - | - |
| Gross revenue | 82,782 | 78,473 | 336,911 |
EBITDA and Cash EBITDA
| For the quarter end / YTD | |||
|---|---|---|---|
| EUR thousand | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 |
| Total income | 62,107 | 57,432 | 239,692 |
| Total operating expenses | -31,709 | -29,740 | -120,738 |
| EBITDA from continuing operations | 30,399 | 27,693 | 118,955 |
| Calculated cost of share option program | 101 | 34 | 462 |
| Portfolio amortization, revaluation and change in forward flow | |||
| commitments | 20,675 | 21,041 | 97,218 |
| Cost of repossessed assets sold, incl. impairment | 198 | 396 | 1,496 |
| Cash EBITDA from continuing operations | 51,372 | 49,164 | 218,130 |
| EBITDA from discontinued operations | -1,354 | -1,616 | -7,008 |
| Cost of REOs sold, incl. impairment | 2,517 | 5,889 | 18,318 |
| Cash EBITDA | 52,535 | 53,437 | 229,440 |
| Taxes paid | -2,903 | -1,200 | -10,713 |
| Change in working capital | -6,715 | 2,920 | 1,291 |
| Cash flow from operating activities before NPL and REO investments | 42,917 | 55,157 | 220,019 |
Estimated remaining collection (ERC)
| For the quarter end / YTD | |||
|---|---|---|---|
| EUR thousand | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 |
| Purchased loan portfolios | 1,242,411 | 1,160,374 | 1,252,642 |
| Estimated opex for future collection at time of acquisition | 360,416 | 310,993 | 363,858 |
| Estimated discounted gain | 919,971 | 787,317 | 928,920 |
| Estimated remaining collection (ERC) | 2,522,798 | 2,258,684 | 2,545,419 |
Net interest-bearing debt (NIBD)
| For the quarter end / YTD | |||
|---|---|---|---|
| EUR thousand | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 |
| Non-current portion of interest-bearing debt from financial position | 278,339 | 864,444 | 445,590 |
| Current portion of interest-bearing debt from financial position | 666,166 | 3,737 | 499,709 |
| Interest-bearing debt, discontinued operations | 8,241 | 19,950 | 10,247 |
| Total interest-bearing debt | 952,746 | 888,131 | 955,546 |
| Capitalized loan fees | -7,233 | -15,320 | -9,144 |
| Accrued interest | 4,223 | 3,738 | 4,172 |
| Cash and cash equivalents from financial position | 27,699 | 35,891 | 29,045 |
| Cash and cash equivalents, discontinued operations | 3,731 | 3,589 | 3,607 |
| Net interest-bearing debt (NIBD) | 924,326 | 860,234 | 927,865 |
Return on equity to shareholders, annualized
| For the quarter end / YTD | ||||
|---|---|---|---|---|
| EUR thousand | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 | |
| Net profit/(loss) after tax attributable to shareholders of the parent company | 7,188 | 6,631 | 36,757 | |
| Average equity for the period related to shareholders of the parent company | 413,075 | 388,083 | 399,433 | |
| Return on equity to shareholders, annualized | 7.1% | 7.0% | 9.2% |
Return on equity, continuing operations, annualized
| For the quarter end / YTD | |||
|---|---|---|---|
| EUR thousand | 31 Mar 2023 | 31 Mar 2022 | Full year 2022 |
| Net profit/(loss) after tax from continuing operations | 7,651 | 7,652 | 40,644 |
| Average total equity for the period | 407,025 | 388,029 | 397,163 |
| Return on equity, continuing operations, annualized | 7.6% | 8.0% | 10.2% |
/ Glossary
Terms
| Active forecast | Forecast of estimated remaining collection on purchased loan portfolios |
|---|---|
| Board | Board of Directors |
| Cash EBITDA margin | Cash EBITDA as a percentage of gross revenue |
| Chair | Chair of the Board of Directors |
| Contribution margin (%) | Total operating expenses (excluding SG&A, IT and corporate cost) as a percentage of total income |
| Collection performance | Gross collection on purchased loan portfolios in relation to active forecast, including sale of repossessed assets in relation to book value |
| Cost-to-collect | Cost to collect is calculated as segment operating expenses plus a pro rata allocation of unallocated operating expenses and unallocated depreciation and amortization. The segment operating expense is used as allocation key for the unallocated costs |
| Equity ratio | Total equity as a percentage of total equity and liabilities |
| Forward flow agreement | Agreement for future acquisitions of loan portfolios at agreed prices and delivery |
| Gross IRR | The credit adjusted interest rate that makes the net present value of ERC equal to the book value of purchased loan portfolios, calculated using monthly cash flows over a 180-months period |
| Group | Axactor ASA and all its subsidiaries |
|---|---|
| NPL amortization rate | Portfolio amortization divided by collection on own portfolios for the NPL segment |
| NPL cost-to-collect ratio | NPL cost to collect divided by NPL total income excluding NPV of changes in collection forecasts and change in fair value of forward flow commitments |
| One off portfolio acquisition | Acquisition of a single loan portfolio |
| Opex | Total operating expenses |
| Recovery rate | Portion of the original debt repaid |
| Replacement capex | Amount of acquisitions of new loan portfolios needed to keep the book value of purchased loan portfolios constant compared to last period |
| Repossession | Taking possession of property due to default on payment of loans secured by property |
| Repossessed assets | Property repossessed from secured loan portfolios |
| SG&A, IT and corporate cost | Total operating expenses for overhead functions, such as HR, finance and legal etc |
| Solution rate | Accumulated paid principal amount for the period divided by accumulated collectable principal amount for the period. Usually expressed on a monthly basis |
Abbreviations
| 3PC | Third-party collection |
|---|---|
| AGM | Annual general meeting |
| APM | Alternative performance measures |
| ARM | Accounts receivable management |
| B2B | Business to business |
| B2C | Business to consumer |
| BoD | Board of Directors |
| BS | Consolidated statement of financial position (balance sheet) |
| CF | Consolidated statement of cash flows |
| CGU | Cash generating unit |
| CM | Contribution margin |
| D&A | Depreciation and amortization |
| Dopex | Direct operating expenses |
| EBIT | Operating profit/Earnings before interest and tax |
| EBITDA | Earnings before interest, tax, depreciation and amortization |
| ECL | |
| Expected credit loss | |
| EGM | Extraordinary general meeting |
| EPS | Earnings per share |
| ERC | Estimated remaining collection |
| ESG | Environmental, social and governance |
| ESOP | Employee stock ownership plan |
| FTE | Full time equivalent |
|---|---|
| GHG | Greenhouse gas emissions |
| HQ | Headquarters |
| IFRS | International financial reporting standards |
| LTV | Loan to value |
| NCI | Non-controlling interests |
| NPL | Non-performing loan |
| OB | Outstanding balance, the total amount Axactor can collect on claims under management, including outstanding principal, interest and fees |
| OCI | Consolidated statement of other comprehensive income |
| P&L | Consolidated statement of profit or loss |
| PCI | Purchased credit impaired |
| PPA | Purchase price allocations |
| REO | Real estate owned |
| ROE | Return on equity |
| SDG | Sustainable development goal |
| SG&A | Selling, general & administrative |
| SPV | Special purpose vehicle |
| VIU | Value in use |
| VPS | Verdipapirsentralen/Norwegian central securities depository |
| WACC | Weighted average cost of capital |
| WAEP | Weighted average exercise price |
Highlights Key figures Operations Financials APM Glossary
