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Axactor SE
Interim / Quarterly Report • Aug 18, 2022
3549_rns_2022-08-18_1706b7af-6809-4c4c-84c6-190e43c7db69.pdf
Interim / Quarterly Report
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Q22022 Report
Highlights 1)
Second quarter 2022
- · Continued income growth and margin expansion in the second quarter, with gross revenue growth for both core segments
- · Annualized return on equity excluding non-controlling interests, including discontinued operations increased to 11.2% (6.9%). The annualized return on equity for continuing operations ended at 12.6% (8.4%)
- · NPL investments amounted to EUR 46.8 million, up from EUR 12.3 million in the second quarter last year. Additionally, estimated forward flow commitments of EUR 57.1 million is secured for the second half of 2022
- · Total gross revenue ended at EUR 87.2 million, up 5% from the second quarter last year (82.8), while total income increased by 13% to EUR 60.4 million (53.5)
- · Total operating expenses ended at EUR 30.4 million for the quarter, up from EUR 28.4 million in the second quarter last year. Adjusting for EUR 0.9 million of restructuring cost in the second quarter 2021, opex over gross revenue increased from 33% to 35%. The increase is primarily driven by increased spending on legal collection, as well as a higher share of 3PC in 2022
- · EBITDA reached EUR 30.0 million (25.1), resulting in an EBITDA margin of 50% (47%)
- · Cash EBITDA was EUR 57.5 million, up from EUR 54.7 million in the second quarter last year. Adding contribution from the discontinued REO operations, Cash EBITDA was EUR 60.5 million (65.7)
- · Net profit came in at EUR 12.5 million (9.0). Including the discontinued operations, the net profit to shareholders was EUR 11.1 million (7.2) and EUR -0.4 million to non-controlling interests (-2.8)
- · Repurchase of bond loans at sub-par value resulted in a positive one-time impact on financial expenses of EUR 1.4 million
- · Full network segmentation has been implemented across the Group's IT infrastructure, significantly enhancing IT security
- · Terje Mjøs, Kathrine Astrup Fredriksen, Brita Eilertsen and Lars Erich Nilsen were re-elected as Board members for another term in the annual general meeting. Kristian Melhuus, will continue in his role as Chair of the Board
- · Axactor ASA (formerly Axactor SE) was converted from a Societas Europaea company to a Norwegian Allmennaksjeselskap
First half 2022
- · Gross revenue for the first half ended at EUR 165.6 million (158.6), while total income ended at EUR 117.8 million (105.4)
- · EBITDA increased from EUR 45.1 million in the first half 2021 to EUR 57.7 million. The resulting EBITDA margin was thus 49% (43%).
- · Net profit from continuing operations for the first half was EUR 20.1 million (8.9). Including the discontinued operations, the net profit to shareholders was EUR 17.7 million (5.7), while net profit to non-controlling interests was EUR -1.4 million (-4.7)
- · NPL investments for the period amounted to EUR 126.5 million, up from EUR 28.4 million in the same period last year. This is significantly more than the replacement capex and adding committed estimated forward flow volume for the second half, EUR 183.5 million of NPL investments is secured for 2022
- · The acquisition of Credit Recovery Service announced in 2021 was formally closed in January 2022 and is included in the consolidated financial statements. The acquisition significantly strengthens Axactor's presence in the Italian 3PC market
Events after the period
· Axactor has continued the repurchase of outstanding bonds to reduce the cost of funding in the third quarter. Up until the publishing of this report, a total of EUR 2.4 million of nominal outstanding amount has been repurchased in the third quarter.
Key Figures Axactor Group
| For the quarter end | Year to date | ||||
|---|---|---|---|---|---|
| EUR million | 30 Jun 2022 | 30 Jun 2021 1) | 30 Jun 2022 | 30 Jun 2021 1) | Full year 2021 1) |
| Gross revenue | 87.2 | 82.8 | 165.6 | 158.6 | 307.6 |
| Total income | 60.4 | 53.5 | 117.8 | 105.4 | 158.3 |
| EBITDA | 30.0 | 25.1 | 57.7 | 45.1 | 40.5 |
| Net profit/(loss) after tax from continuing operations | 12.5 | 9.0 | 20.1 | 8.9 | (25.4) |
| Net profit/(loss) after tax from discontinued operations | (1.8) | (4.6) | (3.8) | (7.9) | (20.6) |
| Net profit/(loss) after tax | 10.6 | 4.4 | 16.3 | 1.0 | (46.0) |
| Return on equity, excluding non-controlling interests, annualized | 11.2% | 6.9% | 9.2% | 3.1% | (8.5%) |
| Return on equity, continuing operations, annualized | 12.6% | 8.4% | 10.4% | 4.4% | (6.2%) |
| Growth gross revenue, period to period | 5.2% | 27.8% | 4.5% | 19.2% | 8.0% |
| Cash and cash equivalents, end of period 2) | 32.1 | 42.1 | 32.1 | 42.1 | 38.2 |
| Cash EBITDA from continuing operations 3) | 57.5 | 54.7 | 106.7 | 99.0 | 192.1 |
| Cash EBITDA 4) | 60.5 | 65.7 | 114.0 | 117.8 | 223.8 |
| Gross revenue from NPL portfolios | 72.6 | 69.9 | 137.8 | 134.1 | 258.0 |
| Acquired NPL portfolios during the period | 46.8 | 12.3 | 126.5 | 28.4 | 114.0 |
| Book value of NPL portfolios, end of period | 1,154.5 | 1,104.1 | 1,154.5 | 1,104.1 | 1,095.8 |
| Estimated remaining collection (ERC), NPL | 2,278.8 | 2,119.3 | 2,278.8 | 2,119.3 | 2,140.5 |
| Interest bearing debt, end of period 5) | 872.3 | 831.4 | 872.3 | 831.4 | 838.3 |
| Number of employees (FTEs), end of period | 1,221 | 1,062 | 1,221 | 1,062 | 1,096 |
| Price per share, last day of period | 5.94 | 10.35 | 5.94 | 10.35 | 7.55 |
1) For some figures, comparative information has been re-presented due to a discontinued operation, see note 12
2) Total cash and cash equivalents from continuing and discontinued operations, excluding restricted cash. See APM table
3) Cash EBITDA from continuing operations is EBITDA adjusted for change in fair value of forward flow commitments, portfolio amortizations and revaluations, repossessed assets cost of sale and impairment, and calculated cost of share option program. See APM table
4) Cash EBITDA is total EBITDA (continuing and discontinued operations) adjusted for change in fair value of forward flow commitments, portfolio amortizations and revaluations, REO and repossessed cost of sales and impairments, and calculated cost of share option program. See APM table
5) Interest bearing debt is total interest bearing debt allocated to continuing and discontinued operations. See APM table.
Operations
Axactor's operations had a hectic quarter with seasonal campaigns related to tax refunds and the upcoming vacation period. Additionally, the uptick in NPL investments over the past six months have increased the volumes to be handled within both amicable collection and legal collection. With an NPL collection performance including the sale of repossessed assets of 99%, the NPL gross revenue grew to EUR 72.6 million for the quarter. The 3PC segment had a solid quarter as well, with 3PC total income of EUR 14.6 million. Italy and Spain were the main contributors to the 3PC growth, with good volume development from both existing and new customers.
The NPL segment had an increase of 15.6 thousand cases compared to the end of the first quarter with estimated remaining collections at the end of first half of EUR 2,279 million. The amount of claims with a registered payment during the quarter increased to 6.3% of all active claims, an all-time high for the Group. Axactor continuously work to increase the number of payment plans to build a predictable and stable cash flow, and to support debtors in gaining better control over their finances.
The effects of the Covid-19 pandemic seem to wear off, while new challenges arise. All of Axactor's markets are facing rising inflation and reduced purchasing power for consumers. So far, the impacts on collection have been limited across the Group, although to some extent visible in the German market. The NPL portfolio performance of 99% underlines this observation.
The two main operational cost elements for Axactor are personnel expenses and fees related to legal collection. Legal cost increased in the quarter due to the new inflow of cases, giving a short-term negative effect on the cost-to-collect. The legal fees are typically paid in advance when the legal collection process is initiated, while the corresponding collection takes time to materialize.
The 3PC segment saw the positive trend continue and the cash collected on behalf of customers was above expectations. The higher collection triggered the payout of performance bonuses and higher commission. Total income ended at EUR 14.6 million, a 13% increase from the corresponding quarter last year, and a 51% increase from the corresponding quarter in 2021.
The integration of Credit Recovery Service (CRS), the Italian credit service provider acquired in January, is progressing according to plan. All 3PC volumes in Italy will be handled by CRS, with most customers already transferred. CRS continues to deliver performance above business case and Axactor expect the Italian 3PC business to deliver double-digit organic growth in 2022 compared to 2021.
The cost saving initiatives implemented during 2021 are visible in the 3PC numbers for the second quarter. Contribution margin over total income was 41%, up from 35% adjusted for restructuring cost in the second quarter of 2021.
Enhancing business intelligence and advanced analytics
Axactor continues to have high attention on developing and improving its advanced analytics capabilities. The centralized data scientist team in Madrid was increased during the quarter, with further recruitment activities ongoing to strengthen the team. The team continues to utilize big data and machine learning to improve internal collection processes and develop models for valuation and revaluation of NPL portfolios.
A successful process mining pilot was executed in Germany during the first half year. The pilot identified both potential cost savings and increased revenue potential through more efficient processes. The tools and the analytical approach will subsequently be implemented for other business segments, as well as expanded to the Nordic countries through best practice sharing within the Axactor business intelligence network.
Expanding the self-service functionality
As of the second quarter, all countries have fully digital payment solutions included in the Axactor debtor portal. Furthermore, the secure chat solution was successfully implemented for Norway with positive feedback from the initial users. The work to improve the debtor portal will continue going forward, enabling new communication channels to reach debtors, making it easier for debtors to access their details and make payments, and at the same time improving Axactor's cost efficiency. The debtor portal saw a continued increase in usage during the second quarter and further increases are expected as new or improved functionalities are developed.
Continued focus on information security and data privacy
During the first six months Axactor implemented full network segmentation across the Group's IT infrastructure. The segmentation provides increased control over network traffic, optimized performance, and most importantly an improved security layer reducing the risk and consequences of being hit by a generalized malware strike.
The General data protection regulation (GDPR) procedures and Data protection impact assessments (DPIA) have been reviewed and updated where necessary. Multiple digital nano learning and classroom trainings have been provided to all employees covering security and GDPR related topics. The e-learning courses will continue through the second half of the year to improve knowledge and awareness of the employees.
Axactor Spain received the Payment card industry data security standard (PCI DSS) certification in June. The PCI DSS reduces the risk of payment card fraud and refers to all measures and controls that must be implemented to guarantee that payment cards are used in a protected environment. The certification strengthens Axactor's position in the Spanish market and PCI DSS will be used to further strengthen the information security procedures.
Human rights and gender equality
The Norwegian "Transparency Act" entered into force 1 July 2022. The Transparency Act establishes new reporting requirements, including a duty to perform regular due diligence assessments verifying compliance with fundamental human rights and decent working conditions. The requirements are valid for both the company with its subsidiaries, and its suppliers and partners. Axactor has always respected internationally recognized human rights and rights at work, which is reflected in our various policies and the Code of Conduct. In light of the Transparency Act, Axactor has elected to establish a separate Human Rights policy, codifying these commitments to ease interested parties' ability to educate themselves on human rights at Axactor. Axactor requires its suppliers and partners to comply with human rights through the Supplier code of conduct. With the new legislation, Axactor is also obliged to conduct and publish the results of due diligence assessments at least annually, as well as to provide information to interested parties. At Axactor, responsible business conduct has always been at the core of the operations, and the Group supports the proactiveness of the Norwegian legislator and believe this is a solid step in the right direction.
Axactor rejects all forms of discrimination in hiring and employment, child labor, threats against people who defend human rights and other human rights violations. At Axactor, diversity is not simply a matter of complying with legal requirements. Axactor believes that the strength lies in the differences between the employees, which is one of the key factors to the company's success. Their varied skills, perspectives and experiences form the basis of innovation and help Axactor to understand the needs of customers and debtors. Axactor is committed to treat everyone equally and with respect, regardless of gender, nationality, disability, marital status, religion, or sexual orientation, and are committed to equal opportunities for all employees.
UN Development goal #5: "Achieve gender equality and empower all women and girls" is supported by Axactor. The Group contribute to this by continuously building sustainable people processes with a stronger emphasis on embedding and inclusion approaches. Appraisal talks have been held with the employees focusing on developing talents through performance management during the first half year. Axactor has conducted extensive mapping of pay gaps between the genders and completed corrective steps where appropriate. The results after this year's wage settlement shows a fair balance between the salaries of the different genders. Axactor has an improved overall gender balance from year end 2021 to Q2 2022 of 64% women (66%) and 36% men (34%). The number of managers has been reduced with 9% during 1H, but the number of female managers increased with 7%. Women outnumber men in leadership positions below the level of country management with 57%. Axactor are continuously working to reach a more balanced gender distribution across all levels, company functions and countries.
A dedicated email address to which interested parties may ask questions about how Axactor addresses actual and potential impacts on fundamental human rights has been created. To ensure the company uncovers any potential irregular activities and behavior that could lead to a breach of the Code of conduct and or the possible commission of a criminal offence, Axactor has a whistle-blower channel in place. The channel has now been made publicly available to ease the reporting possibility also for third parties. The channel as well as the whistle blowing procedure has been reviewed during the quarter.
Update on EU regulations
The European Banking Authority (EBA) published a discussion paper to facilitate the review of the standardized NPL data templates providing common data sets for the screening, financial due diligence and valuation during NPL transactions in the EU of which Axactor prepared a reply. Axactor is pleased to observe that the feedback given has been considered and has, together with several of its peers, arranged to review and comment on the updated version.
Axactor has reviewed and responded to the targeted consultation on the functioning of the ESG ratings market in the European Union and on the consideration of ESG factors in credit ratings. As industry peers being subject to ESG ratings generally and in light of being credit rated, Axactor initiated discussions on the consultations with its peers.
Anti-money laundering
A risk assessment of the anti-money laundering processes and procedures across the Group has been conducted without any material risks identified. To further increase awareness towards money laundering, training has been provided to all relevant employees during the second quarter.
Financials
Revenue
The portfolios of purchased real estate (REO) is treated as discontinued operations effective from the fiscal year 2022, and Axactor continues with two business segments: NPL and 3PC. All comments and numbers in the following text refer to continuing operations unless explicitly stated otherwise. This also applies to figures for previous periods. Please also note that the definition of discontinued operations has changed slightly compared to the first quarter 2022 report: All repossessed assets from Axactor's secured NPL portfolios are now defined as continuing operations.
Total income for the second quarter ended at EUR 60.4 million, up 13% from the corresponding quarter last year (53.5). This was mainly due to a 5% increase in gross revenue, to EUR 87.2 million (82.8). The total income increase was also positively affected by a decline in the NPL portfolio amortization rate from 40% to 37%, supported by the NPL curve revision in the fourth quarter 2021.
The NPL total income was EUR 45.8 million for the quarter, up from EUR 40.6 million in the second quarter 2021. Segment gross revenue grew 4% to EUR 72.6 million driven by the investments in NPL portfolios over the past twelve months (69.9). The effective NPL portfolio amortization rate was 37% (40%), while net NPL revaluations ended at negative EUR 0.8 million (negative 1.4). Out of the gross revenue, EUR 2.3 million is related to sale of repossessed assets (0.9).
The 3PC segment continues to grow on the back of the acquisition of Credit Recovery Service. Additionally, returning volumes after the Covid-19 pandemic drove a slight organic growth. Total income thus ended at EUR 14.6 million, up 13% compared to the second quarter last year (12.9).
For the first half, total income ended at EUR 117.8 million (105.4), while gross revenue ended at EUR 165.6 million (158.6). The total income for the NPL segment was EUR 90.0 million (80.9), while gross revenue was EUR 137.8 million (134.1). 3PC total income was EUR 27.8 million (24.4).
Operating expenses
Total operating expenses before depreciation and amortization amounted to EUR 30.4 million for the second quarter, up from EUR 28.4 million in the corresponding quarter last year. Operating expenses as a percentage of gross revenue increased from 33% to 35% when excluding EUR 0.9 million of restructuring cost in the second quarter 2021. This is primarily driven by increased spending on legal collection in the NPL segment, as well as a slightly higher share of the lower margin 3PC segment. The legal fees are typically paid in advance when the legal collection process is initiated, while the corresponding collection takes time to materialize.
Depreciation and amortization – excluding amortization of NPL portfolios – was EUR 2.2 million for the quarter, down from EUR 2.3 million in the corresponding quarter last year.
For the first half of 2022, total operating expenses was EUR 60.1 million (60.3), while depreciation and amortization was EUR 4.3 million (4.9).
Gross revenue mix Q2-22
Total income mix Q2-22
EBITDA and EBITDA-margin
Operating results
Total contribution from the business segments came in at EUR 41.0 million for the quarter, compared to EUR 35.8 million in the corresponding quarter last year. Both segments saw improvements in their underlying contribution margins in the quarter, also when adjusting for the restructuring cost booked in the second quarter 2021. The contribution margin over total income was 68%, compared to 67% in the second quarter last year.
The NPL segment delivered a contribution margin of EUR 35.1 million in the second quarter, up from EUR 31.9 million in the same quarter last year. The main driver for the improvement was the growth in total income. Margin on total income thus ended at 77%, slightly down from 79% in the second quarter 2021. The decline in margin comes mainly as a result of the increased spending on legal collection, which is expected to generate higher collections in the future.
Contribution from 3PC was EUR 5.9 million, up from EUR 3.9 million in the second quarter 2021. The improvement is mainly driven by organic total income growth, as well as the inclusion of Credit Recovery Service and the cost saving initiatives implemented last year. The margin over total income increased from 35% to 41%, adjusted for restructuring cost in the second quarter 2021.
Total contribution from the business segments for the first half year ended at EUR 79.2 million (67.1), of which NPL contributed EUR 68.7 (62.5) and 3PC EUR 10.5 million (4.6).
EBITDA for the quarter ended at EUR 30.0 million, up from EUR 25.1 million in the second quarter last year. The EBITDA margin was 50%, up from 47% in the same quarter last year. For the first half, EBITDA ended at EUR 57.7 million (45.1), resulting in an EBITDA margin of 49% (43%).
The difference between contribution margin and EBITDA is comprised of unallocated SG&A and IT costs, which amounted to EUR 10.9 million for the quarter, slightly up from the second quarter 2021 (10.7). For the first half, unallocated SG&A and IT cost amounted to EUR 21.5 million (22.0).
Cash EBITDA ended at EUR 57.5 million for the second quarter, compared to EUR 54.7 million for the corresponding quarter last year. The improvement was mainly driven by increased NPL collection and higher 3PC income. Adding the contribution from discontinued operations, cash EBITDA was EUR 60.5 million (65.7). For the first half the cash EBITDA was EUR 106.7 million (99.0) for continuing operations, and EUR 114.0 million including discontinued operations (117.8).
Operating profit (EBIT) was EUR 27.9 million for the second quarter, up from EUR 22.8 million last year. For the first half operating profit was EUR 53.4 million, compared to EUR 40.2 million last year.
Net financial items
Total net financial items for the quarter were negative EUR 13.1 million, compared to negative EUR 10.2 million in the second quarter last year. Total interest expense on borrowings for the quarter was EUR 14.3 million (11.7).
Axactor purchased own outstanding bonds with a total face value of EUR 36.6 million in the quarter. The purchases were made at prices significantly below par, resulting in a positive net gain of EUR 1.4 million.
The net FX impact for the quarter was negative EUR 0.5 million, compared to positive EUR 1.5 million last year.
For the first half, total net financial items were negative EUR 26.5 million (26.0), with interest expense on borrowings of EUR 27.8 million (24.1), the EUR 1.4 million net gain on re-purchase of bonds, and a net FX impact of negative EUR 0.2 million (negative 1.7 million).
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 3.8 million for the quarter (12.4), while EBITDA ended at -1.6 million (-3.0). The net profit was negative EUR 1.8 million, compared to negative EUR 4.6 million in the second quarter 2021.
For the first half, discontinued operations had total income of EUR 8.9 million (21.5), EBITDA of EUR -3.2 (-5.2), and a negative net profit of EUR 3.8 million (negative 7.9).
Earnings and taxes
Earnings before tax ended at EUR 14.7 million for the second quarter (12.6), while net profit ended at EUR 12.5 million (9.0). The effective tax rate was thus 15% for the quarter (29%). The relatively low tax rate in the quarter is caused primarily by utilization of tax losses carried forward that were not previously recognized in the balance sheet, and by reduced impact of limitations on interest cost deductibility. Adding discontinued operations, the net profit was EUR 10.6 million, up from EUR 4.4 million in the second quarter 2021.
The net profit including discontinued operations for the second quarter ended at EUR 11.1 million for shareholders of the parent company (7.2), and at EUR -0.4 million for non-controlling interests (-2.8). The resulting earnings per share was thus EUR 0.037 both on a reported basis (0.024) and fully diluted (0.023), based on the average number of shares outstanding in each period.
For the first half, earnings before tax ended at EUR 27.0 million (14.2), while net profit ended at EUR 20.1 million (8.9). Including the discontinued operations, net profit was EUR 16.3 million (1.0). EUR 17.7 million of the net profit including discontinued operations was attributable to the shareholders of the parent company (5.7), while EUR -1.4 million was attributable to non-controlling interests (-4.7).
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 12.3 million (49.9) for the quarter. The decrease compared to last year is mainly related to higher NPL investments. The amount paid for NPL portfolios increased from EUR 13.2 million in the second quarter 2021 to EUR 43.7 million in the second quarter 2022. 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 NPL portfolios, cash flow from operations for the quarter amounted to EUR 56.0 million, down from EUR 63.0 million in the corresponding period last year. The main driver of the decrease was lower Cash EBITDA from the discontinued operations, partially offset by an increase from continuing operations. Net working capital increased EUR 2.7 million in the quarter, compared to an increase of EUR 2.5 million in the corresponding quarter last year. Taxes paid increased from EUR 0.1 million in the second quarter 2021, to EUR 1.8 million in the second quarter 2022.
For the first half year, net cash flow from operating activities was EUR -15.5 million (88.5), including a cash EBITDA of EUR 114.0 million (117.8), taxes paid of EUR 2.9 million (0.4) and a decrease in net working capital of EUR 0.1 million (7.2).
Total net cash flow from investments, not including investments in NPL portfolios, was EUR -1.5 million for the quarter (-1.5). For the first half year, net cash flow from investments was EUR -5.7 million (-2.6), including EUR 3.1 million related to the acquisition of Credit Recovery Service.
Total net cash flow from financing activities was EUR -17.3 million for the quarter (-51.1), with a net repayment on credit facilities of EUR 4.2 million (37.1). Interests paid increased from EUR 10.8 million in the second quarter last year, to EUR 12.0 million.
For the first half year, total net cash flow from financing activities was EUR 16.5 million (-90.3), with interests paid of EUR 23.5 million (18.5) and a net drawdown on loan facilities of EUR 43.0 million (net repayment of 96.0)
Total net cash flow was EUR -6.5 million for the quarter (-2.7) and EUR -4.7 million for the first half (-4.3), leaving total cash and cash equivalents at EUR 38.5 million at the end of the first half (47.3). This includes EUR 6.4 million in restricted cash (5.2) and EUR 2.8 million allocated to the discontinued operations.
Equity position and balance sheet considerations
Total equity for the Group was EUR 394.5 million at the end of the second quarter (428.9), including non-controlling interests of EUR -2.2 million (12.4). The main reason for the reduced equity compared to last year is the losses recognized during 2021.
The resulting equity ratio at the end of the second quarter was 29% (33%), same as at the end of 2021.
Return on equity
Including both continuing and discontinued operations, the annualized return on equity excluding non-controlling interests for the second quarter was 11.2% (6.9%), while annualized return on equity for continuing operations ended at 12.6% (8.4%).
For the first half year, the annualized return on equity excluding non-controlling interests was 9.2%, up from 3.1% in the first half of 2021. For the continuing operations, annualized return on equity was 10.4%, compared to 4.4% in the first six months of 2021.
Axactor is pleased to see the return on equity improving and aims for further improvements in the near-to mid-term future. The main drivers of the improvements are increasing economies of scale, changes in the business mix, reduced funding cost and the gradual blending in of higher gross IRR NPL portfolios. The company continue to see growth opportunities in the capital light 3PC segment and increasing 3PC and NPL synergies. The company expects the effective tax rate to stabilize at around 27% over time, within the company's current jurisdictions.
Capital expenditure and funding
Axactor invested EUR 46.8 million in NPL portfolios during the second quarter (12.3), and EUR 126.5 million for the first half (28.4). Total estimated NPL investment commitments for the second half of 2022 amounts to EUR 57.1 million. A total of EUR 183.5 million in NPL investments is thus already secured for 2022, compared to the modest investment level of EUR 114.0 million in 2021.
Axactor have 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 matures in January 2024. ACR03 has a nominal value of EUR 300 million and matures in September 2026. After the bond buy-backs in the second quarter, the outstanding face value of ACR02 and ACR03 is EUR 180.5 million and EUR 283.0 million, respectively.
The revolving credit facility from DNB and Nordea has a total size of EUR 545 million, with an additional EUR 75 million accordion option. At the end of the first half the drawn amount on the revolving credit facility was EUR 417.9 million.
Total interest-bearing debt including capitalized loan fees and accrued interest amounted to EUR 872.3 million at the end of the first half (831.4), including EUR 15.6 million allocated to discontinued operations.
Axactor are in compliance with all loan covenants as per the end of the first half 2022.
Outlook
The market for NPL acquisitions continued at a good pace in the second quarter and is expected to continue to do so for the remainder of the year. Although competition is increasing in certain markets, Axactor is still able to identify attractively priced portfolios. With the NPL acquisitions in the first half of the year and estimated forward flow commitments for the second half, Axactor has already secured EUR 183.5 million in NPL investments for 2022. Together with a good start to the third quarter, Axactor thus raises the full year NPL investment guiding to EUR 250-300 million. The investments are expected to be made at gross IRR levels significantly above the average of the current portfolio stack.
Total income from the 3PC segment is expected to continue to grow through the second half of 2022 compared to last year. The acquisition of Credit Recovery Service is the main growth driver, while a continued organic growth adds to the numbers.
The current macroeconomic environment with high inflation and increasing interest rates has so far had limited impacts on Axactor's operations. A potential reduction in the debtors' real disposable income could adversely affect their ability to settle their debt. At the same time, this could lead to higher default rates at the banks, creating more volumes of non-performing loans available for both third-party servicing and for purchase. Increasing interest rates would also impact the Group's funding cost, although a partial interest hedge is in place to reduce the impact. Based on interest rates, debt structure and capitalized loan fees per 30 June 2022, a one percentage point increase in interest rates would increase Axactor's quarterly interest expense by EUR 1.9 million. The ongoing conflict in Ukraine does not directly affect Axactor's operations, and business continuity plans are in place to mitigate potential indirect business impacts. The executive management and Board closely monitor both the general macroeconomic situation and the conflict in Ukraine, and potential business impacts arising from these.
Responsibility Statement
We confirm that, to the best of our knowledge, the condensed set of interim consolidated financial statements for the first half of 2022 has been prepared in accordance with IAS 34 Interim Financial Reporting and gives a true and fair view of the assets, liabilities, financial position and profit or loss for the Group and the company taken as whole.
We also confirm that, to the best of our knowledge, that the half-yearly report gives a fair overview of important events that have occurred during the first six months of the financial year and their impact on the half-yearly financial report, any significant related party transactions, and a description of the principal risks and uncertainties for the remaining six months of the financial year.
Oslo, 17 August 2022 The Board of Directors and Chief Executive Officer
Kristian Melhuus Chair of the Board
Brita Eilertsen Board member
Terje Mjøs Board member
Lars Erich Nilsen Board member
Kathrine Astrup Fredriksen Board member
Johnny Tsolis Chief Executive Officer
Interim condensed consolidated statement of profit or loss
| For the quarter end | Year to date | ||||||
|---|---|---|---|---|---|---|---|
| EUR thousand | Note | 30 Jun 2022 | 30 Jun 2021 1) | 30 Jun 2022 | 30 Jun 2021 1) | Full year 2021 1) | |
| Continuing operations | |||||||
| Interest income from purchased loan portfolios | 5, 6 | 46,049 | 41,779 | 89,542 | 83,677 | 168,421 | |
| Net gain/(loss) purchased loan portfolios | 5, 6 | (2,541) | (2,084) | (3,058) | (4,120) | (62,013) | |
| Revenue from sale of repossessed assets | 5 | 2,291 | 906 | 3,520 | 1,745 | 3,018 | |
| Other operating revenue | 14,602 | 12,901 | 27,814 | 24,075 | 48,858 | ||
| Other income | - | 3 | 15 | 2 | 15 | ||
| Total income | 3, 5 | 60,400 | 53,505 | 117,832 | 105,379 | 158,298 | |
| Cost of repossessed assets sold, incl impairment | (531) | (205) | (927) | (599) | (2,136) | ||
| Personnel expenses | (16,574) | (14,252) | (32,277) | (33,120) | (61,313) | ||
| Operating expenses | (13,256) | (13,908) | (26,898) | (26,594) | (54,350) | ||
| Total operating expenses | (30,362) | (28,365) | (60,101) | (60,314) | (117,800) | ||
| EBITDA | 30,038 | 25,140 | 57,731 | 45,066 | 40,498 | ||
| Amortization and depreciation | (2,186) | (2,310) | (4,300) | (4,888) | (9,616) | ||
| Operating profit | 27,852 | 22,830 | 53,431 | 40,177 | 30,882 | ||
| Financial revenue | 4 | 2,087 | 1,565 | 2,185 | 1,010 | 3,033 | |
| Financial expenses | 4 | (15,206) | (11,800) | (28,664) | (26,962) | (54,012) | |
| Net financial items | (13,118) | (10,235) | (26,479) | (25,952) | (50,979) | ||
| Profit/(loss) before tax from continuing operations | 14,733 | 12,595 | 26,953 | 14,225 | (20,097) | ||
| Tax (expense) | (2,270) | (3,619) | (6,837) | (5,329) | (5,296) | ||
| Net profit/(loss) after tax from continuing operations | 12,463 | 8,976 | 20,116 | 8,897 | (25,393) | ||
| Discontinued operations | |||||||
| Net profit/(loss) after tax from discontinued operations | 12 | (1,847) | (4,596) | (3,829) | (7,910) | (20,599) | |
| Net profit/(loss) after tax | 10,616 | 4,380 | 16,287 | 987 | (45,992) | ||
| Attributable to: | |||||||
| Non-conrolling interests: | |||||||
| Net profit/(loss) after tax from continuing operations | 637 | (100) | 820 | (192) | (952) | ||
| Net profit/(loss) after tax from discontinued operations | (1,084) | (2,671) | (2,227) | (4,538) | (12,242) | ||
| Net profit/(loss) after tax | (447) | (2,771) | (1,407) | (4,730) | (13,194) | ||
| Shareholdes of the parent company: | |||||||
| Net profit/(loss) after tax from continuing operations | 11,827 | 9,076 | 19,296 | 9,089 | (24,440) | ||
| Net profit/(loss) after tax from discontinued operations | (763) | (1,924) | (1,602) | (3,371) | (8,357) | ||
| Net profit/(loss) after tax | 11,063 | 7,152 | 17,694 | 5,717 | (32,797) | ||
| Earnings per share: | |||||||
| From continuing operations, basic | 0.039 | 0.030 | 0.064 | 0.032 | (0.083) | ||
| From continuing operations, diluted | 0.039 | 0.029 | 0.064 | 0.031 | (0.083) | ||
| From continuing and discontinued operations, basic: | 0.037 | 0.024 | 0.059 | 0.020 | (0.112) | ||
| From continuing and discontinued operations, diluted: | 0.037 | 0.023 | 0.059 | 0.019 | (0.112) |
1) Comparative information has been re-presented due to a discontinued operation, see note 12.
Interim condensed consolidated statement of comprehensive income
| EUR thousand | For the quarter end | Year to date | |||
|---|---|---|---|---|---|
| 30 Jun 2022 | 30 Jun 2021 | 30 Jun 2022 | 30 Jun 2021 | Full year 2021 | |
| Net profit/(loss) after tax | 10,616 | 4,380 | 16,287 | 987 | (45,992) |
| Items that will not be classified subsequently to profit and loss | |||||
| Remeasurement of pension plans | - | - | - | - | (4) |
| Net gain/(loss) on equity instruments designated at fair value through OCI |
- | - | - | - | (16) |
| Items that may be classified subsequently to profit and loss | |||||
| Foreign currency translation differences - foreign operations | (12,595) | (3,433) | (6,691) | 6,429 | 8,924 |
| Net gain/(loss) on cash flow hedges | 2,100 | - | 5,151 | - | (230) |
| Other comprehensive income/(loss) after tax | (10,494) | (3,433) | (1,540) | 6,429 | 8,675 |
| Total comprehensive income/(loss) for the period | 122 | 948 | 14,747 | 7,416 | (37,317) |
| Attributable to: | |||||
| Non-controlling interests | (447) | (2,771) | (1,407) | (4,730) | (13,194) |
| Shareholders of the parent company | 569 | 3,719 | 16,154 | 12,146 | (24,123) |
Interim condensed consolidated statement of financial position
| EUR thousand | Note | 30 Jun 2022 | 30 Jun 2021 | Full year 2021 |
|---|---|---|---|---|
| Assets | ||||
| Intangible non-current assets | ||||
| Intangible assets | 17,373 | 19,064 | 17,824 | |
| Goodwill | 61,452 | 55,527 | 55,960 | |
| Deferred tax assets | 12,307 | 7,766 | 13,700 | |
| Tangible non-current assets | ||||
| Property, plant and equipment | 2,464 | 2,509 | 2,290 | |
| Right of use assets | 8 | 12,909 | 3,704 | 10,768 |
| Financial non-current assets | ||||
| Purchased debt portfolios | 6 | 1,154,509 | 1,104,079 | 1,095,789 |
| Other non-current receivables | 6,571 | 416 | 338 | |
| Other non-current investments | 28 | 196 | 28 | |
| Total non-current assets | 1,267,613 | 1,193,260 | 1,196,698 | |
| Current assets | ||||
| Stock of secured assets | - | 55,012 | 29,310 | |
| Repossessed assets | 2,243 | - | - | |
| Accounts receivable | 5,919 | 5,975 | 7,060 | |
| Other current assets | 16,538 | 12,832 | 16,154 | |
| Restricted cash | 6,421 | 5,228 | 5,798 | |
| Cash and cash equivalents | 29,264 | 42,111 | 38,155 | |
| Total current assets | 60,384 | 121,157 | 96,476 | |
| Assets classified as held for sale | 12 | 20,008 | - | - |
| Total assets | 1,348,005 | 1,314,417 | 1,293,175 |
Interim condensed consolidated statement of financial position
| EUR thousand | Note | 30 Jun 2022 | 30 Jun 2021 | Full year 2021 |
|---|---|---|---|---|
| Equity and liabilities | ||||
| Share capital | 10 | 158,369 | 158,150 | 158,150 |
| Other paid-in equity | 270,168 | 269,907 | 269,919 | |
| Retained earnings | 10 | (23,000) | (1,956) | (40,475) |
| Translation reserve | (13,765) | (9,570) | (7,074) | |
| Other reserves | 4,905 | - | (245) | |
| Non-controlling interests | (2,175) | 12,365 | 976 | |
| Total equity | 394,502 | 428,895 | 381,249 | |
| Non-current liabilities | ||||
| Interest bearing debt | 7 | 853,297 | 695,658 | 834,411 |
| Deferred tax liabilities | 10,567 | 6,395 | 6,144 | |
| Lease liabilities | 8 | 10,209 | 2,078 | 8,866 |
| Other non-current liabilities | 2,130 | 1,567 | 1,994 | |
| Total non-current liabilities | 876,202 | 705,698 | 851,415 | |
| Current liabilities | ||||
| Accounts payable | 7,939 | 6,145 | 7,282 | |
| Current portion of interest bearing debt | 7 | 3,404 | 135,737 | 3,845 |
| Taxes payable | 19,977 | 16,944 | 20,259 | |
| Lease liabilities | 8 | 2,981 | 1,866 | 2,185 |
| Other current liabilities | 9 | 26,170 | 19,132 | 26,941 |
| Total current liabilities | 60,472 | 179,824 | 60,511 | |
| Liabilities directly associated with assets classified as held for sale | 12 | 16,829 | ||
| Total liabilities | 953,503 | 885,522 | 911,925 | |
| Total equity and liabilities | 1,348,005 | 1,314,417 | 1,293,175 |
Interim condensed consolidated statement of cash flows
| For the quarter end | Year to date | |||||
|---|---|---|---|---|---|---|
| EUR thousand | Note | 30 Jun 2022 | 30 Jun 2021 | 30 Jun 2022 | 30 Jun 2021 | Full year 2021 |
| Operating activities | ||||||
| Profit/(loss) before tax from continued operations | 14,733 | 12,595 | 26,953 | 14,225 | (20,097) | |
| Profit/(loss) before tax from discontinued operations | 12 | (1,847) | (4,596) | (3,829) | (7,910) | (20,599) |
| Taxes paid | (1,814) | (127) | (2,852) | (424) | (3,261) | |
| Adjustments for: | ||||||
| - Finance income and expenses | 4 | 13,410 | 11,826 | 27,136 | 28,659 | 54,775 |
| - Portfolio amortization and revaluation | 26,754 | 29,330 | 47,795 | 52,802 | 148,542 | |
| - Cost of repossessed assets sold, incl impairment | 531 | 205 | 927 | 599 | 2,136 | |
| - Cost of REOs sold, incl impairment | 12 | 4,543 | 13,939 | 10,432 | 23,930 | 48,379 |
| - Depreciation and amortization | 2,186 | 2,325 | 4,300 | 4,919 | 9,654 | |
| - Calculated cost of employee share options | 215 | 68 | 249 | 168 | 180 | |
| Change in working capital | (2,682) | (2,544) | 74 | 7,184 | 4,991 | |
| Cash flow from operating activities before NPL and REO investments |
56,029 | 63,021 | 111,185 | 124,153 | 224,700 | |
| Purchase of debt portfolios | 6 | (43,706) | (13,218) | (126,533) | (35,841) | (115,402) |
| Sale of debt portfolio | 6 | - | 150 | - | 300 | 450 |
| Purchases related to REO/repossessed assets | (54) | (69) | (103) | (113) | (193) | |
| Net cash flow from operating activities | 12,269 | 49,884 | (15,451) | 88,499 | 109,555 | |
| Investing activities | ||||||
| Investment in subsidiaries, net of cash aquired | 11 | - | - | (3,085) | - | - |
| Purchase of intangible and tangible assets | (1,497) | (1,453) | (2,710) | (2,567) | (4,718) | |
| Interest received | 31 | - | 45 | - | 5 | |
| Net cash flow from investing activities | (1,465) | (1,453) | (5,750) | (2,567) | (4,712) | |
| Financing activities | ||||||
| Proceeds from borrowings | 7 | 33,592 | 128,440 | 201,224 | 154,490 | 542,496 |
| Repayment of debt | 7 | (37,771) | (165,561) | (158,183) | (250,460) | (628,681) |
| Interest paid | (11,964) | (10,783) | (23,550) | (18,512) | (42,050) | |
| Loan fees paid | 7 | (3) | (215) | (83) | (19,973) | (24,033) |
| Lease payments | 8 | (519) | (784) | (1,202) | (1,429) | (2,812) |
| New share issues | - | - | - | 50,792 | 50,792 | |
| Repayments to non-controlling interests | (644) | (2,225) | (1,744) | (3,700) | (6,625) | |
| Cost related to share issues | - | - | - | (1,460) | (1,460) | |
| Net cash flow from financing activities | (17,308) | (51,127) | 16,463 | (90,252) | (112,373) | |
| Net change in cash and cash equivalents | (6,505) | (2,697) | (4,739) | (4,321) | (7,531) | |
| Cash and cash equivalents at the beginning of period | 45,977 | 50,052 | 43,953 | 50,725 | 50,725 | |
| Currency translation | (997) | (17) | (738) | 934 | 759 | |
| Cash and cash equivalents at end of period, incl. restricted funds | 38,475 | 47,338 | 38,476 | 47,338 | 43,953 |
Interim condensed consolidated statement of changes in equity
| Restricted | |||||||
|---|---|---|---|---|---|---|---|
| Share Capital |
Other paid in equity |
Translation reserve |
Other reserves |
Retained earnings |
Total | Non controlling interest |
Total Equity |
| 97,040 | 236,562 | (15,999) | (16,036) | 301,566 | 74,113 | 375,680 | |
| 987 | |||||||
| 6,429 | |||||||
| 7,416 | |||||||
| (3,701) | |||||||
| 7,319 | 8,363 | 15,682 | (53,317) | (37,635) | |||
| 61,110 | 27,318 | 88,427 | 88,427 | ||||
| (1,460) | (1,460) | (1,460) | |||||
| 168 | 168 | 168 | |||||
| 158,150 | 269,907 | (9,570) | - | (1,956) | 416,530 | 12,365 | 428,895 |
| (46,978) | |||||||
| 2,495 | (245) | (4) | 2,246 | - | 2,246 | ||
| - | - | 2,495 | (245) | (38,519) | (36,269) | (8,464) | (44,733) |
| - | (2,924) | (2,924) | |||||
| 12 | 12 | 12 | |||||
| 158,150 | 269,919 | (7,074) | (245) | (40,475) | 380,273 | 976 | 381,249 |
| 17,694 | 17,694 | (1,407) | 16,287 | ||||
| (6,691) | 5,151 | (1,540) | (1,540) | ||||
| - | - | (6,691) | 5,151 | 17,694 | 16,154 | (1,407) | 14,747 |
| - | (1,744) | (1,744) | |||||
| 249 | 249 | 249 | |||||
| 219 | (219) | - | - | ||||
| 158,369 | 270,168 | (13,765) | 4,905 | (23,000) | 396,676 | (2,175) | 394,502 |
| - | - | 6,429 6,429 |
Non-restricted - |
Equity related to the shareholders of the parent company 5,717 5,717 (38,515) |
5,717 6,429 12,146 - (38,515) |
(4,730) (4,730) (3,701) (8,464) |
Notes to the Financial Report
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, excluding discontinued operations, correspond to those described in the Annual Report for the Financial Year 2021. The discontinued operations are described in note 12 of the interim report. 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 for the Financial Year 2021.
In preparing these interim financial statements, management has made judgements and estimates 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. Critical accounting estimates and judgements in terms of accounting policies are more comprehensively discussed in the Group Annual Report for the Financial Year 2021, which is available on Axactor's website: www.axactor.com.
The significant judgements made by management applying the Group's accounting policies and the key resources 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.
Conversion from SE to ASA
On the Annual General Meeting on 21 April 2022, it was resolved that the parent company in the Axactor Group were to convert form from a Societas Europaea company (SE) to a Norwegian public limited liability company (ASA). It was further resolved that the parent company were to change name from Axactor SE to Axactor ASA and to amend the company's articles of association. The resolved conversion of form, change of name, and amendment of articles of association were registered with the Norwegian Register of Business Enterprises (Foretaksregisteret) on 2 May 2022. Reference is made to the stock exchange announcement by Axactor SE on 2 May 2022.
Update on the process of revaluation model expansion
As communicated in a press release on 13 December 2021, Axactor ASA has received a conclusion from the Norwegian Financial Supervisory Authority (FSA) in accordance with the preliminary conclusion as stated in the press release of 2 September 2021. The FSA requires that the company expands its revaluation model for portfolios of non-performing loans (NPL) with more input variables capturing current and future macroeconomic conditions and use of scenarios with effect from the reporting of the annual accounts for the financial year 2022.
The estimation of future cash flow is affected by several factors, including general macro factors, market specific factors, portfolio specific factors and internal factors. Axactor has been considering relevant macro factors and market specific factors when estimating future cash flow but not as direct input generating output in the forecast models. The company takes notice of the conclusion from the FSA and has started the work on expanding the portfolio valuation model to better reflect the macro factors and scenarios as required.
The company has over the last months performed extensive testing to identify any significant correlation between macroeconomic variables and collection. The variables that have been tested are interest rate, unemployment, GDP growth, housing price growth, household consumption, disposable income, inflation and salary growth, and testing has been performed both on debtor level and portfolio level. The company has worked on building a framework for a scenario model including external and internal drivers of cash collection. The model will be tested and implemented during the year with effect for the annual accounts for 2022.
Note 2 Risks and uncertainties
Axactor's regular business activities entail exposure to various types of risk. The Group manages such risks proactively and the Board of Directors regularly analyses its operations and potential risk factors and takes steps to reduce risk exposure. Axactor gives strong emphasis to quality assurance and has quality systems implemented, or under implementation in line with the requirements applicable to its business operations.
The risks include but are not limited to credit risk, risk inherent in purchased debt, interest rate risk, regulatory risk, liquidity risk and financing risk. The Group tightly monitors its different risks in all countries where Axactor companies are present. The credit management is negatively affected by a weakened economy. Risks associated with changes in economic conditions are monitored through on-going dialogue with each country management team and through regular follow up on macro-economic development in each country. For a more elaborate discussion on the aforementioned risks one is referred to the Group's Annual Report for the Financial Year 2021, which is available on Axactor's website: www.axactor.com (Note 3 of the Group financial statement).
The first half of 2022 has seen increasing geopolitical risk in Europe with the ongoing conflict in Ukraine. Although Axactor's operations are not directly impacted by the conflict, the executive management and the Board of Directors closely monitor the situation and potential indirect business impacts and maintain the business continuity plans.
Interest risk / hedge accounting
The war on Ukraine and the following international sanctions and geopolitical uncertainty has, in addition to the human tragedy, added momentum to already high inflation levels. This has led central banks to increase interest rates earlier and at a faster pace than expected at the start of the year.
The Group holds interest rate caps, a derivative financial instrument with the purpose of reducing the Group's interest rate exposure. At quarter end the fair value of the interest rate hedging derivatives was positive EUR 5.2 million. The Group holds two contracts at quarter end hedging a total of EUR 200 million in interest rate risk on bond loans. The Group started with hedge accounting at the end of 2021. The Group's strategy is to hedge between 50% and 70% of interest bearing debt with a duration of three to five years. At the end of the first half of 2022 the hedging ratio was 23%. For further information see note 19 in the annual report for 2021
Liquidity risk
The Group monitors its risk of a shortage of funds using cash flow forecasts regularly. The Group had cash and cash equivalents incl. restricted funds of EUR 38.5 million at 30 June 2022 (30 June 2021: EUR 47.3 million), as reconciled in the consolidated statement of cash flows.
The following table details the Group's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. For forward flow NPL agreements 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. 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. The contractual maturity is based on the earliest date on which the Group may be required to pay.
The loan repayment amounts presented are subject to change dependent on a change in variable interest rates.
| EUR thousand | Q3-22 | Q4-22 | Q1-23 | Q2-23 | 1-2 years | 2-4 years | 4+ years | Total |
|---|---|---|---|---|---|---|---|---|
| Forward flow NPL agreements, non-cancellable 1) 2) | 28,237 | 24,671 | 21,334 | 21,158 | 9,096 | - | - | 104,497 |
| Forward flow NPL agreements, cancellable 1) 2) 3) | - | 4,181 | 4,181 | 4,181 | 31,160 | 5,100 | - | 48,804 |
| Revolving credit facility DNB/Nordea | 3,284 | 3,284 | 3,284 | 3,284 | 407,935 | - | 421,070 | |
| Bond (ISIN: NO0010914666) | 3,194 | 3,229 | 3,229 | 3,159 | 190,151 | - | 202,961 | |
| Bond (ISIN: NO0011093718) | 3,869 | 3,827 | 3,784 | 3,869 | 15,348 | 30,738 | 286,819 | 348,253 |
| Other non-current liabilities | - | - | - | - | - | - | 2,130 | 2,130 |
| Accounts payable | 7,939 | - | - | - | - | - | - | 7,939 |
| Other current liabilities | 22,406 | 3,764 | - | - | - | - | - | 26,170 |
| Total allocated to continuing operations | 68,928 | 42,955 | 35,813 | 35,651 | 653,691 | 35,838 | 288,948 | 1,161,825 |
| Total allocated to discontinued operations | 1,224 | - | - | - | 15,605 | - | - | 16,829 |
| Total | 70,152 | 42,955 | 35,813 | 35,651 | 669,296 | 35,838 | 288,948 | 1,178,654 |
1) Forward flow NPL agreements split by country:
Norway 48 % Germany 42 %
Italy 5 %
Finland 5 %
2) Expected cash flows. Cash flows are limited to EUR 244.4 million by contracted capex limits.
3) Cancellable with three months notice
The ERC represents the estimated gross collection on the NPL 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):
For the quarter end 30 Jun 2022
| EUR thousand | Estimated remaining collection (ERC), amortization and interest income from purchased loan portfolios next four quarters | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Year | Q3 2022 | Q4 2022 | Q1 2023 | Q2 2023 | Year 1 | ||||||
| ERC | 67,376 | 69,422 | 74,721 | 77,228 | 288,747 | ||||||
| Amortization | 22,012 | 24,922 | 31,300 | 35,291 | 113,526 | ||||||
| Interest income from purchased loan portfolios | 45,364 | 44,500 | 43,420 | 41,937 | 175,222 |
For the quarter end 30 Jun 2021
| EUR thousand | Estimated remaining collection (ERC), amortization and interest income from purchased loan portfolios next four quarters | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Year | Q3 2021 | Q4 2021 | Q1 2022 | Q 2022 | Year 1 | |||||
| ERC | 71,738 | 80,153 | 67,617 | 67,742 | 287,250 | |||||
| Amortization | 31,083 | 40,823 | 29,885 | 31,162 | 132,953 | |||||
| Interest income from purchased loan portfolios | 40,655 | 39,330 | 37,732 | 36,580 | 154,297 |
For the quarter end 30 Jun 2022
| 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 |
| ERC | 288,747 273,820 | 244,490 220,753 189,256 | 167,134 | 150,616 | 135,705 122,094 | 109,591 | 99,220 | 89,500 | 72,603 | 62,987 | 52,265 | 2,278,780 | ||||
| Amortization | 113,526 | 118,931 109,572 103,699 | 87,305 | 78,116 | 73,026 | 68,816 | 65,299 | 62,373 | 61,263 | 60,684 | 52,511 | 50,899 | 48,489 | 1,154,508 | ||
| Interest income from purchased |
||||||||||||||||
| loan portfolios 175,222 154,889 | 134,918 | 117,054 | 101,951 | 89,018 | 77,590 | 66,888 | 56,795 | 47,218 | 37,957 | 28,816 | 20,092 | 12,088 | 3,776 | 1,124,272 |
For the quarter end 30 Jun 2021
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 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ERC | 287,250 247,905 | 218,625 | 193,670 | 173,112 155,096 | 139,417 | 125,768 | 113,669 | 102,770 | 92,692 | 84,251 | 75,590 | 59,033 | 50,433 | 2,119,282 | ||
| Amortization | 132,953 | 112,478 | 99,247 | 88,138 | 79,991 | 73,301 | 67,995 | 64,019 | 61,054 | 58,906 | 57,282 | 57,165 | 56,812 | 48,101 | 46,637 | 1,104,079 |
| Interest income from purchased |
||||||||||||||||
| loan portfolios 154,297 | 135,427 | 119,378 105,532 | 93,121 | 81,795 | 71,422 | 61,749 | 52,615 | 43,864 | 35,410 | 27,086 | 18,778 | 10,932 | 3,796 | 1,015,203 |
Note 3 Segment reporting
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. Subsequently, the outstanding debt is 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 typically receive a commission for these services. Other services provided include, amongst other, 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 typically 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 total income 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 as well as finance costs. The measurement basis of the performance of the segment is the segment's contribution margin.
Portfolios of purchased real estate is classified as a discontinued operation (see note 12). Portfolios of purchased real estate has prior to 2022 been reported as part of the real estate owned (REO) operating segment. From 2022, in line with internal reporting, REO is no longer considered a separate operating segment. The REO segment consisted of portfolios of purchased real estate as well as repossessed assets from secured non-performing loans. From the second quarter of 2022, in line with the organization and reporting structure used by management, the repossessed assets from secured non-performing loans are reported as part of the NPL segment, whereas amounts from discontinued operations are not included in the segment reporting. Segment information for earlier periods is restated to reflect the change in operating segments.
For the quarter end 30 Jun 2022
| EUR thousand | NPL | 3PC | Eliminations/ Not allocated |
Total |
|---|---|---|---|---|
| Collection on own portfolios | 70,262 | - | - | 70,262 |
| Portfolio amortization and revaluation | (26,754) | - | - | (26,754) |
| Revenue from sale of repossessed assets | 2,291 | - | - | 2,291 |
| Other operating income: | ||||
| -Change in fair value of forward flow commitments | - | - | - | - |
| -Other operating revenue and other income | - | 14,602 | - | 14,602 |
| Total income | 45,798 | 14,602 | - | 60,400 |
| Cost of repossessed assets sold | (531) | - | - | (531) |
| Impairment repossessed assets | - | - | - | - |
| Direct operating expenses | (10,203) | (8,686) | - | (18,889) |
| Contribution margin | 35,064 | 5,916 | - | 40,980 |
| SG&A, IT and corporate cost | (10,942) | (10,942) | ||
| EBITDA | 30,038 | |||
| Amortization and depreciation | (2,186) | (2,186) | ||
| Operating result | 27,852 | |||
| Total operating expenses | (10,734) | (8,686) | (10,942) | (30,362) |
| Contribution margin (%) | 76.6% | 40.5% | na | 67.8% |
| EBITDA margin (%) | 49.7% | |||
| Opex ex SG&A, IT and corporate cost / Gross revenue | 14.8% | 59.5% | na | 22.3% |
| SG&A, IT and corporate cost / Gross revenue | 12.6% |
For the quarter end 30 Jun 2021
| EUR thousand | NPL | 3PC | Eliminations/ Not allocated |
Total |
|---|---|---|---|---|
| Collection on own portfolios | 69,025 | - | - | 69,025 |
| Portfolio amortization and revaluation | (29,330) | - | - | (29,330) |
| Revenue from sale of repossessed assets | 906 | - | - | 906 |
| Other operating income: | ||||
| -Change in fair value of forward flow commitments | 1 | - | - | 1 |
| -Other operating revenue and other income | - | 12,899 | 3 | 12,902 |
| Total income | 40,602 | 12,899 | 3 | 53,505 |
| Cost of repossessed assets sold | (205) | - | - | (205) |
| Impairment repossessed assets | - | - | - | - |
| Direct operating expenses | (8,478) | (8,990) | - | (17,469) |
| Contribution margin | 31,920 | 3,909 | 3 | 35,831 |
| SG&A, IT and corporate cost | (10,692) | (10,692) | ||
| EBITDA | 25,140 | |||
| Amortization and depreciation | (2,310) | (2,310) | ||
| Operating result | (2,310) | 22,830 | ||
| Total operating expenses | (8,683) | (8,990) | (10,692) | (28,365) |
| Contribution margin (%) | 78.6% | 30.3% | na | 67.0% |
| EBITDA margin (%) | 47.0% | |||
| Opex ex SG&A, IT and corporate cost / Gross revenue | 12.4% | 69.7% | na | 21.3% |
| SG&A, IT and corporate cost / Gross revenue | 12.9% |
Year to date 30 Jun 2022
| EUR thousand | NPL | 3PC | Eliminations/ Not allocated |
Total |
|---|---|---|---|---|
| Collection on own portfolios | 134,279 | - | - | 134,279 |
| Portfolio amortization and revaluation | (47,795) | - | - | (47,795) |
| Revenue from sale of repossessed assets | 3,520 | - | - | 3,520 |
| Other operating income: | ||||
| -Change in fair value of forward flow commitments | - | - | - | - |
| -Other operating revenue and other income | - | 27,814 | 15 | 27,828 |
| Total income | 90,004 | 27,814 | 15 | 117,832 |
| Cost of repossessed assets sold | (927) | - | - | (927) |
| Impairment repossessed assets | - | - | - | - |
| Direct operating expenses | (20,361) | (17,354) | - | (37,714) |
| Contribution margin | 68,716 | 10,460 | 15 | 79,191 |
| SG&A, IT and corporate cost | (21,460) | (21,460) | ||
| EBITDA | 57,731 | |||
| Amortization and depreciation | (4,300) | (4,300) | ||
| Operating result | 53,431 | |||
| Total operating expenses | (21,287) | (17,354) | (21,460) | (60,101) |
| Contribution margin (%) | 76.3% | 37.6% | na | 67.2% |
| EBITDA margin (%) | 49.0% | |||
| Opex ex SG&A, IT and corporate cost / Gross revenue | 15.4% | 62.4% | na | 23.3% |
| SG&A, IT and corporate cost / Gross revenue | 13.0% |
Year to date 30 Jun 2021
| EUR thousand | NPL | 3PC | Eliminations/ Not allocated |
Total |
|---|---|---|---|---|
| Collection on own portfolios | 132,360 | - | - | 132,360 |
| Portfolio amortization and revaluation | (52,802) | - | - | (52,802) |
| Revenue from sale of repossessed assets | 1,745 | - | - | 1,745 |
| Other operating income: | ||||
| -Change in fair value of forward flow commitments | (374) | - | - | (374) |
| -Other operating revenue and other income | - | 24,448 | 2 | 24,451 |
| Total income | 80,929 | 24,448 | 2 | 105,379 |
| Cost of repossessed assets sold | (599) | - | - | (599) |
| Impairment repossessed assets | - | - | - | - |
| Direct operating expenses | (17,847) | (19,863) | - | (37,710) |
| Contribution margin | 62,482 | 4,585 | 2 | 67,070 |
| SG&A, IT and corporate cost | (22,004) | (22,004) | ||
| EBITDA | 45,066 | |||
| Amortization and depreciation | (4,888) | (4,888) | ||
| Operating result | 40,177 | |||
| Total operating expenses | (18,447) | (19,863) | (22,004) | (60,314) |
| Contribution margin (%) | 77.2% | 18.8% | na | 63.6% |
| EBITDA margin (%) | 42.8% | |||
| Opex ex SG&A, IT and corporate cost / Gross revenue | 13.8% | 81.2% | na | 24.2% |
| SG&A, IT and corporate cost / Gross revenue | 13.9% |
Full year 2021
| EUR thousand | NPL | 3PC | Eliminations/ Not allocated |
Total |
|---|---|---|---|---|
| Collection on own portfolios | 254,949 | - | - | 254,949 |
| Portfolio amortization and revaluation | (148,542) | - | - | (148,542) |
| Revenue from sale of repossessed assets | 3,018 | - | - | 3,018 |
| Other operating income: | ||||
| -Change in fair value of forward flow commitments | (782) | - | - | (782) |
| -Other operating revenue and other income | - | 49,640 | 15 | 49,655 |
| Total income | 108,643 | 49,640 | 15 | 158,298 |
| Cost of repossessed assets sold | (2,046) | - | - | (2,046) |
| Impairment repossessed assets | (90) | - | - | (90) |
| Direct operating expenses | (36,819) | (34,235) | - | (71,055) |
| Contribution margin | 69,687 | 15,405 | 15 | 85,107 |
| SG&A, IT and corporate cost | (44,609) | (44,609) | ||
| EBITDA | 40,498 | |||
| Amortization and depreciation | (9,616) | (9,616) | ||
| Operating result | 30,882 | |||
| Total operating expenses | (38,956) | (34,235) | (44,609) | (117,800) |
| Contribution margin (%) | 64.1% | 31.0% | na | 53.8% |
| EBITDA margin (%) | 25.6% | |||
| Opex ex SG&A, IT and corporate cost / Gross revenue | 15.1% | 69.0% | na | 23.8% |
| SG&A, IT and corporate cost / Gross revenue | 14.5% |
Note 4 Financial items
| For the quarter end | Year to date | ||||
|---|---|---|---|---|---|
| EUR thousand | 30 Jun 2022 | 30 Jun 2021 | 30 Jun 2022 | 30 Jun 2021 | Full year 2021 |
| Financial revenue | |||||
| Interest on bank deposits | 31 | - | 45 | - | 5 |
| Exchange gains realized | 107 | 103 | 179 | 985 | 2,982 |
| Net unrealized exchange gain | - | 1,459 | - | - | - |
| Gain on purchase of bonds in own bond loans (note 7) | 1,947 | - | 1,947 | - | - |
| Other financial income | 2 | 3 | 15 | 24 | 46 |
| Total financial revenue allocated to continuing operations | 2,087 | 1,565 | 2,185 | 1,010 | 3,033 |
| Total financial revenue allocated to discontinued operations | - | - | - | - | - |
| Total financial revenue | 2,087 | 1,565 | 2,185 | 1,010 | 3,033 |
| Financial expenses | |||||
| Interest expense on borrowings 1) | (14,333) | (11,662) | (27,796) | (24,077) | (49,099) |
| Exchange losses realized | (61) | (66) | (135) | (203) | (3,161) |
| Net unrealized exchange loss | (508) | - | (259) | (2,526) | (1,326) |
| Other financial expenses 2) | (304) | (72) | (474) | (156) | (427) |
| Total financial expenses allocated to continuing operations | (15,206) | (11,800) | (28,664) | (26,962) | (54,012) |
| Total financial expenses allocated to discontinued operations | (291) | (1,591) | (657) | (2,707) - |
(3,796) |
| Total financial expenses | (15,497) | (13,391) | (29,321) | (29,669) | (57,809) |
| Net financial items allocated to continuing operations | (13,118) | (10,235) | (26,479) | (25,952) | (50,979) |
| Net financial items allocated to discontinued operations | (291) | (1,591) | (657) | (2,707) | (3,796) |
| Total net financial items | (13,410) | (11,826) | (27,136) | (28,659) | (54,775) |
1) Interest expense on borrowings for the second quarter of 2022 includes EUR 0.6 million in amortization of capitalized loan fees related to the relative fair value of repurchased bonds
2) Includes interest expense from negative bank accounts in group multicurrency cash pool and negative interest on bank deposits.
Note 5 Total income
The Group operates in seven European countries: Finland, Germany, Italy, Luxembourg, Norway, Spain, and Sweden. Apart from in Luxembourg, Axactor delivers credit management services in all countries. The Group's revenue from continuing operations from external customers by location of operations are detailed below.
| Total income | For the quarter end | Year to date | |||
|---|---|---|---|---|---|
| EUR thousand | 30 Jun 2022 | 30 Jun 2021 | 30 Jun 2022 | 30 Jun 2021 | Full year 2021 |
| Finland | 4,121 | 3,722 | 7,971 | 7,656 | 10,113 |
| Germany | 9,369 | 8,068 | 17,240 | 16,629 | 30,331 |
| Italy | 7,068 | 4,589 | 13,422 | 9,428 | 17,387 |
| Norway | 9,730 | 10,832 | 21,753 | 20,566 | 35,271 |
| Spain | 22,817 | 16,585 | 42,748 | 32,799 | 59,009 |
| Sweden | 7,295 | 9,709 | 14,698 | 18,301 | 6,187 |
| Total income from continuing operations | 60,400 | 53,505 | 117,832 | 105,379 | 158,298 |
| Total income from discontinued operations | 3,823 | 12,355 | 8,865 | 21,511 | 36,828 |
| Total income | 64,223 | 65,859 | 126,697 | 126,891 | 195,127 |
| Non-current assets 1) | For the quarter end | Year to date | |||
|---|---|---|---|---|---|
| EUR thousand | 30 Jun 2022 | 30 Jun 2021 | 30 Jun 2022 | 30 Jun 2021 | Full year 2021 |
| Finland Germany |
4,066 15,672 |
4,294 13,079 |
4,066 15,672 |
4,294 13,079 |
4,052 15,884 |
| Italy | 16,060 | 9,368 | 16,060 | 9,368 | 9,184 |
| Norway | 34,507 | 33,062 | 34,507 | 33,062 | 36,088 |
| Spain | 20,221 | 18,658 | 20,221 | 18,658 | 17,519 |
| Sweden | 3,672 | 2,340 | 3,672 | 2,340 | 4,115 |
| Total assets | 94,198 | 80,803 | 94,198 | 80,803 | 86,843 |
1) Non-current assets consist of intangible assets, goodwill, property, plant and equipment and right-of-use assets. There are no non-current assets related to discontinued operations.
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. In line with the information given in note 3 and 12, revenue from sale of repossessed assets is reported as part of the NPL segment from the second quarter of 2022. The portfolio revenue tables below will hence include revenue from sale of repossessed assets for current and prior periods. Net gain/(loss) from purchased loan portfolios is split into collection above/(below) collection forecasts (previously reported as CU1) and net present value of changes in collection forecasts (previously reported as CU2 and CU2 tail).
| EUR thousand | Finland | Germany | Italy | Norway | Spain | Sweden | For the quarter end 30 Jun 2022 |
|---|---|---|---|---|---|---|---|
| Interest income from purchased loan portfolios | 3,684 | 6,996 | 4,837 | 9,882 | 13,504 | 7,146 | 46,049 |
| Collection above/(below) forecasts | 216 | (882) | (64) | (1,781) | (213) | 986 | (1,738) |
| NPV of changes in collection forecasts | 48 | 1,030 | 39 | (33) | (418) | (1,469) | (803) |
| Net gain/(loss) purchased loan portfolios | 264 | 148 | (25) | (1,814) | (631) | (483) | (2,541) |
| Sale of repossessed assets | 2,291 | 2,291 | |||||
| Total | 3,948 | 7,143 | 4,813 | 8,068 | 15,163 | 6,663 | 45,798 |
| EUR thousand | Finland | Germany | Italy | Norway | Spain | Sweden | For the quarter end 30 Jun 2021 |
|---|---|---|---|---|---|---|---|
| Interest income from purchased loan portfolios | 3,750 | 5,139 | 4,079 | 9,240 | 10,993 | 8,578 | 41,779 |
| Collection above/(below) forecasts | (139) | 43 | (67) | (657) | (133) | 280 | (674) |
| NPV of changes in collection forecasts | (79) | 111 | 47 | 331 | (2,359) | 540 | (1,410) |
| Net gain/(loss) purchased loan portfolios | (219) | 154 | (20) | (326) | (2,492) | 819 | (2,084) |
| Sale of repossessed assets | 906 | 906 | |||||
| Total | 3,531 | 5,293 | 4,058 | 8,914 | 9,407 | 9,398 | 40,601 |
| EUR thousand | Finland | Germany | Italy | Norway | Spain | Sweden | Year to date 30 Jun 2022 |
|---|---|---|---|---|---|---|---|
| Interest income from purchased loan portfolios | 7,274 | 13,327 | 8,979 | 19,647 | 25,942 | 14,373 | 89,542 |
| Collection above/(below) forecasts | 388 | (1,590) | 87 | (1,396) | (643) | 777 | (2,377) |
| NPV of changes in collection forecasts | (8) | 1,319 | 83 | 129 | (631) | (1,574) | (681) |
| Net gain/(loss) purchased loan portfolios | 380 | (270) | 171 | (1,267) | (1,274) | (798) | (3,058) |
| Sale of repossessed assets | 3,520 | 3,520 | |||||
| Total | 7,654 | 13,057 | 9,150 | 18,379 | 28,188 | 13,575 | 90,004 |
| EUR thousand | Finland | Germany | Italy | Norway | Spain | Sweden | Year to date 30 Jun 2021 |
|---|---|---|---|---|---|---|---|
| Interest income from purchased loan portfolios | 7,497 | 10,444 | 8,240 | 18,028 | 22,252 | 17,216 | 83,677 |
| Collection above/(below) forecasts | (304) | 450 | 52 | (2,224) | (727) | (446) | (3,200) |
| NPV of changes in collection forecasts | 16 | 225 | 88 | 1,193 | (3,482) | 1,040 | (919) |
| Net gain/(loss) purchased loan portfolios | (288) | 675 | 140 | (1,031) | (4,210) | 595 | (4,120) |
| Sale of repossessed assets | 1,745 | 1,745 | |||||
| Total | 7,209 | 11,119 | 8,380 | 16,997 | 19,787 | 17,810 | 81,302 |
| EUR thousand | Finland | Germany | Italy | Norway | Spain | Sweden | Full year 2021 |
|---|---|---|---|---|---|---|---|
| Interest income from purchased loan portfolios | 14,931 | 21,612 | 16,023 | 36,889 | 44,911 | 34,055 | 168,421 |
| Collection above/(below) forecasts | (1,728) | (1,223) | (272) | (5,932) | (1,605) | (7,107) | (17,868) |
| NPV of changes in collection forecasts | (3,817) | (229) | (684) | (2,728) | (14,589) | (22,098) | (44,146) |
| Net gain/(loss) purchased loan portfolios | (5,546) | (1,452) | (956) | (8,660) | (16,194) | (29,206) | (62,013) |
| Sale of repossessed assets | 3,018 | 3,018 | |||||
| Total | 9,385 | 20,160 | 15,067 | 28,230 | 31,734 | 4,849 | 109,426 |
Note 6 Purchased debt portfolios
| For the quarter end | Year to date | ||||
|---|---|---|---|---|---|
| EUR thousand | 30 Jun 2022 | 30 Jun 2021 | 30 Jun 2022 | 30 Jun 2021 | Full year 2021 |
| Balance at start of period | 1,160,374 | 1,123,596 | 1,095,789 | 1,124,699 | 1,124,699 |
| Acquisitions during the period 3) | 46,840 | 12,317 | 126,457 | 28,438 | 113,979 |
| Collection | (70,262) | (69,025) | (134,279) | (132,360) | (254,949) |
| Interest income from purchased loan portfolios | 46,049 | 41,779 | 89,542 | 83,677 | 168,421 |
| Net gain/(loss) purchased loan portfolios 1) | (2,541) | (2,084) | (3,058) | (4,120) | (62,013) |
| Repossession of secured NPL | (180) | (623) | (484) | (642) | (845) |
| Deliveries on forward flow contracts | - | (976) | (409) | (976) | (1,221) |
| Disposals 1) | - | - | - | - | (193) |
| Translation difference | (25,771) | (904) | (19,048) | 5,362 | 7,911 |
| Balance at end of period | 1,154,509 | 1,104,079 | 1,154,509 | 1,104,079 | 1,095,789 |
| Payments during the year for investments in purchased debt amounted to EUR 2) |
43,707 | 13,218 | 126,533 | 35,841 | 115,402 |
1) Gain on disposals is netted in P&L as 'Net gain/(loss) purchased loan portfolios'
2) Payments during the year will not correspond to credit impaired acqusitions during the year due to deferred payments
3) Reconciliation of credit impaired acquisitions during the period;
| Nominal value acquired portfolios | 1,027,217 | 23,070 | 1,227,634 | 51,891 | 827,810 |
|---|---|---|---|---|---|
| Expected credit losses at acquisition | (980,376) | (10,753) | (1,101,177) | (23,453) | (713,831) |
| Credit impaired acquisitions during the period | 46,840 | 12,317 | 126,457 | 28,438 | 113,979 |
For an elaborate description of Axactor's accounting principles for purchased debt, see note 2.12.1, and for a description of revenue recognition and fair value estimation, see note 4, in the Group's Annual Report for the Financial Year 2021.
Non-performing loans consist of portfolios of delinquent consumer debts purchased significantly below nominal value, reflecting incurred and expected credit losses, and thus defined as credit impaired. NPLs 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 in the consolidated balance sheet 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 an asset collateral basis.
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 and updated in line with expectation on an array of economic factors and conditions that will be experienced over time. Changes in expected cash flow are adjusted in the carrying amount and are recognized in profit or loss as income or expense in 'Net gain/(loss) purchased loan portfolios'. Interest income is recognized using a credit adjusted effective interest rate, included in 'Interest income from purchased loan portfolios'.
The majority of the non-performing loans are unsecured. Only a small part of the loans, approximately 5% of the book value of the loans, is secured by a property object.
| Market | Book value |
|---|---|
| Finland | 115,464 |
| Germany | 154,786 |
| Italy | 138,132 |
| Norway | 245,165 |
| Spain | 288,399 |
| Sweden | 212,562 |
| Total | 1,154,509 |
The estimation of future cash flow is affected by several factors, including general macro factors, market specific factors, portfolio specific factors and internal factors. Axactor considers relevant macro factors and market specific factors when estimating future cash flow but not as direct input generating output in the forecast models. Portfolio specific factors and internal factors are considered to affect the estimation of future cash flow significantly more than changes in general macro factors and market specific factors.
Axactor has incorporated into the estimated remaining collection (ERC) the effect of the economic factors and conditions that is expected to influence collections going forward. An analysis of the effects of historical crisis like the financial crisis in 2008 and the experience on collections of the Covid-19 over the last years has formed the basis for the current ERC. The ERC table is included in note 2.
Note 7 Borrowings
| Facility | Nominal | Treasury | Capitalized | Accrued | Carrying amount, |
||||
|---|---|---|---|---|---|---|---|---|---|
| EUR thousand | Currency | limit | value | bonds | loan fees | interest | EUR | Interest coupon | Maturity |
| Facility | |||||||||
| Bond ACR02 (ISIN: NO0010914666) | EUR | 200,000 | (19,500) | (3,300) | 2,773 | 179,973 3m EURIBOR+700bps | 12.01.2024 | ||
| Bond ACR03 (ISIN: NO0011093718) | EUR | 300,000 | (17,050) | (3,292) | 630 | 280,288 3m EURIBOR+535bps | 15.09.2026 | ||
| Total bond loan | 500,000 | (36,550) | (6,592) | 3,403 | 460,261 | ||||
| Revolving credit facility DNB/Nordea | EUR | 88,226 | (5,808) | 2 | 82,420 | EURIBOR+ margin | 22.12.2023 | ||
| (multiple currency facility) | NOK | 118,746 | 118,746 | NIBOR+ margin | 22.12.2023 | ||||
| SEK | 210,880 | 210,880 | STIBOR+ margin | 22.12.2023 | |||||
| Total credit facilities | 545,000 | 417,852 | (5,808) | 2 | 412,045 | ||||
| Total borrowings at end of period | 917,852 | (36,550) | (12,400) | 3,404 | 872,306 | ||||
| Allocated to continuing operations: | 856,701 | ||||||||
| Allocated to discontinued operations: | 15,605 | ||||||||
| whereof: | |||||||||
| Non-current | 868,901 | ||||||||
| Allocated to continuing operations: | 853,297 | ||||||||
| Allocated to discontinued operations: | 15,605 | ||||||||
| Current | 3,404 | ||||||||
| Allocated to continuing operations: | 3,404 | ||||||||
| Allocated to discontinued operations: | - | ||||||||
| of which in currency: | |||||||||
| NOK | 118,746 | ||||||||
| SEK | 210,880 | ||||||||
| EUR | 542,680 |
All borrowings in discontinued operations are denominated in EUR.
| EUR thousand | Bond loan | Credit facilities | Total Borrowings |
|---|---|---|---|
| Balance at 1 Jan | 495,193 | 343,063 | 838,256 |
| Proceeds from loans and borrowings | - | 201,224 | 201,224 |
| Repayment of loans and borrowings | (36,550) | (121,633) | (158,183) |
| Loan fees | - | (83) | (83) |
| Total changes in financial cash flow | (36,550) | 79,508 | 42,958 |
| Change in accrued interest | (421) | (13) | (434) |
| Amortization capitalized loan fees | 2,039 | 3,210 | 5,249 |
| Currency translation differences | - | (13,722) | (13,723) |
| Total borrowings at end of period | 460,261 | 412,045 | 872,306 |
| Allocated to continuing operations: | 856,701 | ||
| Allocated to discontinued operations: | 15,605 |
Maturity
| Total estimated Carrying future amount cash flow |
Estimated future cash flow within | ||||||
|---|---|---|---|---|---|---|---|
| EUR thousand | Currency | 6 months or less | 6-12 months | 1-2 years | 2-5 years | ||
| Bond ACR02 (ISIN: NO0010914666) | EUR | 179,973 | 202,961 | 6,423 | 6,388 | 190,151 | - |
| Bond ACR03 (ISIN: NO0011093718) | EUR | 280,288 | 348,253 | 7,695 | 7,653 | 15,348 | 317,557 |
| Total bond loan | 460,261 | 551,214 | 14,118 | 14,041 | 205,499 | 317,557 | |
| Revolving credit facility DNB/Nordea (multiple currency facility) |
EUR/NOK/SEK | 412,046 | 436,675 | 6,567 | 6,567 | 423,540 | - |
| Total credit facilities | 412,046 | 436,675 | 6,567 | 6,567 | 423,540 | - | |
| Total borrowings at end of period | 872,306 | 987,889 | 20,685 | 20,608 | 629,039 | 317,557 | |
| Allocated to continuing operations: | 856,701 | ||||||
| Allocated to discontinued operations: | 15,605 |
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.
Bond loans
Bond ACR02 (ISIN NO 0010914666) was placed at 3m EURIBOR +7.00% interest, with maturity date 12 January 2024.
The bond is listed on Oslo Børs.
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 debt portfolios and REOs).
- · Net secured loan to value: <65% (secured loans less cash to total book value all debt portfolios and REOs).
Trustee: Nordic Trustee
Bond ACR03 (ISIN NO 0011093718) was placed at 3m EURIBOR +5.35% interest, with maturity date 15 September 2026.
The bond is listed on Oslo Børs.
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 debt portfolios and REOs).
- · Net secured loan to value: <65% (secured loans less cash to total book value all debt portfolios and REOs).
Trustee: Nordic Trustee
During the second quarter of 2022 the Group has repurchased part of the outstanding bonds. At the end of the second quarter the Group holds treasury bonds with a nominal value of EUR 36.6 million, split between EUR 17.1 million in ACR03 (ISIN NO 0011093718) and EUR 19.5 million in ACR02 (ISIN NO 0010914666).
Revolving credit facility DNB/Nordea
The revolving credit facility consists of EUR 545 million in a multicurrency facility, with an additional EUR 75 million accordion option. The loan carries a variable interest rate based on the interbank rate in each currency with a margin.
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 debt 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 debt portfolios and REOs).
The maturity date for the facility is 22 December 2023.
All material subsidiaries of the Group are guarantors and have granted a share pledge and bank account pledge as part of the security package for this facility. ReoLux Holding Sarl is not part of the agreement nor the security arrangement.
Note 8 Leasing
All leases are related to continuing operations.
Right of use assets
| EUR thousand | Buildings | Vehicles | Other | Total |
|---|---|---|---|---|
| Right of use assets at 1 Jan 2021 | 3,949 | 797 | 80 | 4,826 |
| New leases and lease modifications | 429 | (46) | - | 383 |
| Depreciation of the year | (1,152) | (182) | (74) | (1,408) |
| Disposals | (67) | (38) | (4) | (110) |
| Currency exchange effects | 12 | 1 | - | 13 |
| Right of use assets at 30 Jun 2021 | 3,171 | 532 | 1 | 3,704 |
| New leases and lease modifications | 8,904 | 153 | 51 | 9,108 |
| Depreciation of the year | (1,351) | (164) | (6) | (1,521) |
| Disposals | (417) | (46) | - | (462) |
| Currency exchange effects | (60) | - | - | (61) |
| Right of use assets at 31 Dec 2021 | 10,247 | 475 | 46 | 10,768 |
| New leases and lease modifications | 3,832 | 105 | - | 3,937 |
| Depreciation of the period | (1,252) | (164) | (7) | (1,423) |
| Disposals | (120) | (3) | - | (123) |
| Currency exchange effects | (246) | (2) | (2) | (251) |
| Right of use assets at 30 Jun 2022 | 12,460 | 411 | 37 | 12,909 |
| Remaining lease term | 0-10 years | 0-3 years | 0-3 years | |
| Depreciation method | Linear | Linear | Linear |
Lease liabilities
| EUR thousand | 30 Jun 2022 | 30 Jun 2021 | Full year 2021 | |
|---|---|---|---|---|
| Lease liabilities at 1 Jan | 11,051 | 5,086 | 5,086 | |
| New leases, modifications and terminations | 3,563 | 272 | 8812 | |
| Lease payments | (1,202) | (1429) | (2812) | |
| Currency exchange effects | (222) | 14 | (35) | |
| Lease liabilities at period end | 13,190 | 3,943 | 11,051 | |
| Current | 2,981 | 1,866 | 2,185 | |
| Non-current | 10,209 | 2,078 | 8,866 | |
| EUR thousand | 30 Jun 2022 | 30 Jun 2021 | Full year 2021 |
|---|---|---|---|
| Undiscounted lease liabilities and maturity of cash outflow | |||
| < 1 year | 3,617 | 2,024 | 2,717 |
| 1-2 years | 3,029 | 1,171 | 2,511 |
| 2-3 years | 2,623 | 702 | 2,065 |
| 3-4 years | 2,456 | 216 | 1,821 |
| 4-5 years | 1,753 | 67 | 1,800 |
| > 5 years | 1,803 | 45 | 2,100 |
| Total undiscounted lease liabilities, end of period | 15,281 | 4,225 | 13,015 |
| Discount element | (2,092) | (282) | (1,964) |
| Total discounted lease liabilities, end of period | 13,190 | 3,943 | 11,051 |
Note 9 Fair value of forward flow commitments, balance movements
Changes in the fair value of forward flow commitments is shown below. For additional information, see Note 2.12.2 in Group Annual Report for the Financial Year 2021.
| EUR thousand | 30 Jun 2022 | 30 Jun 2021 | Full year 2021 |
|---|---|---|---|
| Balance at 1 Jan | (409) | (834) | (834) |
| Deliveries | 409 | 976 | 1,221 |
| Value change | - | (374) | (782) |
| Translation difference | - | (14) | (14) |
| Balance at period end | - | (246) | (409) |
The change in fair value of forward flow commitments is included in 'Other current assets' and 'Other current liabilities' in the consolidated statement of financial position;
| 30 Jun 2022 | 30 Jun 2021 | Full year 2021 |
|---|---|---|
| - | (246) | (409) |
| - | (246) | (409) |
Note 10 Shares
Issued shares and share capital
On 21 April 2022, the parent company in the Axactor Group converted form from Societas Europaea company (SE) to a Norwegian public limited liability company (ASA) and converted the share capital from euro to Norwegian kroner. A bonus issue was carried out on the same day, whereby NOK 2,126,326 (EUR 218,961) was transferred from unrestricted equity to share capital. The share capital of Axactor ASA as of 30 June 2022 was NOK 1,537,920,412 (EUR 158,368,902) consisting of 302,145,464 ordinary shares at par value of NOK 5.09 per share.
| Number of shares | Share capital (EUR) |
|
|---|---|---|
| At 31 Dec 2020 | 185,395,464 | 97,040,286 |
| New share issues, Jan | 50,000,000 | 26,171,159 |
| New share issues, Jan | 40,000,000 | 20,936,928 |
| New share issues, Mar | 26,750,000 | 14,001,570 |
| At 31 Dec 2021 | 302,145,464 | 158,149,942 |
| Bonus issue, Apr | 218,961 | |
| At 30 Jun 2022 | 302,145,464 | 158,368,902 |
20 largest shareholders as at 30 Jun 2022
| Name | Shareholding | % Share |
|---|---|---|
| Geveran Trading Co Ltd | 138,920,892 | 46.0% |
| Skandinaviska Enskilda Banken AB | 10,631,151 | 3.5% |
| Torstein Ingvald Tvenge | 10,000,000 | 3.3% |
| Ferd AS | 7,864,139 | 2.6% |
| Verdipapirfondet Nordea Norge Verdi | 4,454,162 | 1.5% |
| Nordnet Livsforsikring AS | 2,403,244 | 0.8% |
| Endre Rangnes | 2,017,000 | 0.7% |
| Gvepseborg AS | 2,009,694 | 0.7% |
| Nordnet Bank AB | 1,775,486 | 0.6% |
| Alpette AS | 1,661,643 | 0.5% |
| Verdipapirfondet Nordea Avkastning | 1,535,709 | 0.5% |
| Velde Holding AS | 1,500,000 | 0.5% |
| Masani AS | 1,400,000 | 0.5% |
| Citibank, N.A. | 1,300,022 | 0.4% |
| Verdipapirfondet Nordea Kapital | 1,255,847 | 0.4% |
| J.P. Morgan SE | 1,197,422 | 0.4% |
| David Martin Ibeas | 1,177,525 | 0.4% |
| Andres Lopez Sanchez | 1,177,525 | 0.4% |
| Nordea Bank Abp | 1,174,338 | 0.4% |
| Latino Invest AS | 1,040,000 | 0.3% |
| Total 20 largest shareholders | 194,495,799 | 64.4% |
| Other shareholders | 107,649,665 | 35.6% |
| Total number of shares | 302,145,464 | 100% |
| Total number of shareholders | 10,178 |
Shares owned by related parties
| 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) 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% |
| Brita Eilertsen 3) 19,892 |
0.0% |
1) CEO/Related to the CEO of Axactor ASA
2) Member of the Executive Management Team of Axactor
3) Member of the Board of Directors of Axactor / controlled by member of the Board of Directors of Axactor
4) Holds 300,000 call options that will be settled in cash on 22 June 2023
Note 11 Purchase price allocation
The Group secured 100% of the shares in C.R. Service - Credit Recovery Service S.r.l (CRS) on 26 October 2021 and the transaction was closed 3 January 2022.
CRS is an Italian debt collection agency, managed from the headquarter in Grosseto (Tuscany) and has a contact center in Milazzo (Sicily) with a total of 155 employees. After the transaction Axactor has a strong footprint with 279 employees in Italy. CRS is a top-5 independent 3PC-player in the Italian bank and finance segment. The acquisition supports the Group's strategy of strengthening the position in existing countries, improving capabilities on 3PC and preparing for post-pandemic volumes and new signed contracts in Italy.
The purchase price allocation identifies a fair value of the equity of EUR 0.7 million, the residual value of the transferred consideration, EUR 6.3 million, is allocated to goodwill. All goodwill in the acquisition is related to CRS' 3PC business. The total amount of goodwill recognized in the period that is expected to be deductible for tax purposes is nil. The Group has recognized a provision per 3 January 2022 of EUR 2.6 million related to three contingent considerations. The payments are contingent upon retention and financial performance.
The table below discloses the impact from the transaction effective from 3 January 2022.
| 2022 | |
|---|---|
| EUR thousand | CRS |
| Date of acquisition | 3 Jan 2022 |
| Acquired part of company | 100% |
| Purchase price | 7,033 |
| - Whereof cash consideration | 4,433 |
| - Whereof contingent consideration | 2,600 |
| Assets | |
| Deferred tax assets | 103 |
| Other intangible fixed assets | 15 |
| Leases | 990 |
| Other tangible assets | 50 |
| Current receivables | 989 |
| Cash and cash equivalents | 1,348 |
| Total assets | 3,495 |
| Liabilities | |
| Non-current interest bearing debt | 67 |
| Deferred tax liabilities | 265 |
| Trade payables | 256 |
| Lease liabilities | 1,095 |
| Other short-term liabilities | 1,105 |
| Total liabilities | 2,788 |
| Total net assets acquired | 707 |
| Identified goodwill | 6,326 |
| Cash consideration | 4,433 |
| Less: cash and cash equivalent balances acquired | 1,348 |
| Net cash outflow arising on acquisition: | 3,085 |
Note 12 Discontinued operations
On 15 December 2021 the Board resolved to dispose of the Group's real estate owned (REO) operating segment. The REO segment consisted of portfolios of purchased real estate and repossessed assets from secured non-performing loans. In the first quarter of 2022, both portfolios of purchased real estate and repossessed assets from secured non-performing 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 non-performing loans prior to 2022 are thus presented as continuing operations, and the Group will also continue with repossessions from secured non-performing loans 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 businesses. These operations, which are 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. As per 30 June 2022, the Group is still pursuing a buyer and expects the disposal group to be sold within year end.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between continuing operations and discontinued operations are eliminated. 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 net asset value 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 allocated to discontinued operations. The net assets directly associated with the assets classified as held for sale represents minority interests in the discontinued operations.
| For the quarter end | Year to date | ||||
|---|---|---|---|---|---|
| EUR thousand | 30 Jun 2022 | 30 Jun 2021 | 30 Jun 2022 | 30 Jun 2021 | Full year 2021 |
| Other operating revenue | 3,823 | 12,355 | 8,865 | 21,511 | 36,828 |
| Total income | 3,823 | 12,355 | 8,865 | 21,511 | 36,828 |
| Cost of REOs sold, incl impairment | (4,543) | (13,939) | (10,432) | (23,930) | (48,379) |
| Operating expenses | (836) | (1,405) | (1,605) | (2,754) | (5,215) |
| Total operating expenses | (5,379) | (15,344) | (12,037) | (26,684) | (53,593) |
| EBITDA | (1,556) | (2,989) | (3,172) | (5,173) | (16,765) |
| Amortization and depreciation | - | (15) | - | (30) | (38) |
| Operating profit | (1,556) | (3,005) | (3,172) | (5,203) | (16,803) |
| Financial expenses | (291) | (1,591) | (657) | (2,707) | (3,796) |
| Net financial items | (291) | (1,591) | (657) | (2,707) | (3,796) |
| Profit/(loss) before tax | (1,847) | (4,596) | (3,829) | (7,910) | (20,599) |
| Tax (expense) | - | - | - | - | - |
| Net profit/(loss) after tax | (1,847) | (4,596) | (3,829) | (7,910) | (20,599) |
| Attributable to: | |||||
| Non-controlling interests | (1,084) | (2,671) | (2,227) | (4,538) | (12,242) |
| Shareholders of the parent company | (763) | (1,924) | (1,602) | (3,371) | (8,357) |
| Earnings per share: basic | (0.003) | (0.006) | (0.005) | (0.012) | (0.028) |
| Earnings per share: diluted | (0.003) | (0.006) | (0.005) | (0.011) | (0.028) |
The results of the discontinued operations, which have been included in net profit/(loss) after tax, were as follows:
The major classes of assets and liabilities comprising the operations classified as held for sale are as follows:
| EUR thousand | 30 Jun 2022 |
|---|---|
| Current assets | |
| Stock of secured assets | 16,296 |
| Accounts receivable | 602 |
| Other current assets | 319 |
| Cash and cash equivalents | 2,791 |
| Total current assets | 20,008 |
| Assets classified as held for sale | 20,008 |
| Non-current liabilities | |
| Interest bearing debt | 15,605 |
| Total non-current liabilities | 15,605 |
| Current liabilities | |
| Other current liabilities | 1,224 |
| Total current liabilities | 1,224 |
| Liabilities directly associated with assets classified as held for sale | 16,829 |
| Net assets directly associated with assets classified as held for sale | 3,179 |
The net cash flows incurred by the operations classified as held for sale are as follows:
| For the quarter end | Year to date | ||||
|---|---|---|---|---|---|
| EUR thousand | 30 Jun 2022 | 30 Jun 2021 | 30 Jun 2022 | 30 Jun 2021 | Full year 2021 |
| Net cash flow from operating activities | 1,871 | 9,385 | 5,062 | 17,874 | 28,535 |
| Net cash flow from investing activities | - | - | - | - | - |
| Net cash flow from financing activities | (2,669) | (12,789) | (6,789) | (22,106) | (33,151) |
| Total net cash flow | (798) | (3,404) | (1,727) | (4,232) | (4,616) |
Note 13 Events after the reporting period
Since the reporting date, Axactor has repurchased EUR 2.4 million of the outstanding bonds.
Alternative performance measures
Alternative performance measures (APM) 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 and cash equivalents | Consolidated cash and cash equivalents, from continuing and discontinued operations |
To reflect the Group's total cash position |
Cash and cash equivalents from the consolidated statement of financial position plus cash and cash equivalents from discontinued operations according to note 12 |
| Cash EBITDA from continuing operations |
EBITDA adjusted for change in fair value of forward flow commitments, portfolio amortizations and revaluations, repossessed assets cost of sale and impairment, and calculated cost of share option program |
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 12, 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 own portfolios (NPLs) 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 debt portfolios from the consolidated statement of financial position |
| Net interest bearing debt (NIBD) |
Net interest bearing debt means the NIBD is used as an indication of the aggregated amount of interest bearing Group's ability to pay off all of its debt debt allocated to both continuing and discontinued operations, less aggregated amount of unrestricted cash and cash equivalents, on a consolidated basis |
Non-current interest bearing debt, current portion of interest bearing debt and unrestricted cash and cash equivalents from the consolidated statement of financial position plus debt allocated to discontinued operations according to note 12, adjusted for capitalized loan fees and accrued interest according to note 8 |
|
| Return on equity (ROE), excluding non-controlling interests, annualized |
Net consolidated result 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 (ROE), continuing operations, annualized |
Net profit/(loss) after tax from continuing operations divided by average total equity for the period, annualized |
Measures the profitability in relation to total equity. This APM has replaced 'Return on equity, including non controlling interests, annualized' to measure the profitability in relation to continuing operations. |
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 |
APM tables
Gross revenue
| For the quarter end | Year to date | |||||
|---|---|---|---|---|---|---|
| EUR thousand | 30 Jun 2022 | 30 Jun 2021 1) | 30 Jun 2022 | 30 Jun 2021 1) | Full year 2021 1) | |
| Total income | 60,400 | 53,505 | 117,832 | 105,379 | 158,298 | |
| Portfolio amortizations and revaluations | 26,754 | 29,330 | 47,795 | 52,802 | 148,542 | |
| Change in fair value of forward flow commitments | - | (1) | - | 374 | 782 | |
| Gross revenue | 87,154 | 82,833 | 165,628 | 158,555 | 307,622 |
1) Comparative figures has been re-presented due to a discontinued operation, see note 12.
EBITDA and Cash EBITDA
| For the quarter end | Year to date | ||||
|---|---|---|---|---|---|
| EUR thousand | 30 Jun 2022 | 30 Jun 2021 1) | 30 Jun 2022 | 30 Jun 2021 1) | Full year 2021 1) |
| Total income | 60,400 | 53,505 | 117,832 | 105,379 | 158,298 |
| Total operating expenses | (30,362) | (28,365) | (60,101) | (60,314) | (117,800) |
| EBITDA from continuing operations | 30,038 | 25,140 | 57,731 | 45,066 | 40,498 |
| Change in working capital related to forward flow commitments | - | (1) | - | 374 | 782 |
| Calculated cost of share option program | 215 | 68 | 249 | 168 | 180 |
| Portfolio amortizations and revaluations | 26,754 | 29,330 | 47,795 | 52,802 | 148,542 |
| Cost of repossessed assets sold, incl impairment | 531 | 205 | 927 | 599 | 2,136 |
| Cash EBITDA from continuing operations | 57,539 | 54,741 | 106,702 | 99,009 | 192,138 |
| EBITDA from discontinued operations | (1,556) | (2,989) | (3,172) | (5,173) | (16,765) |
| Cost of REOs sold, incl impairment | 4,543 | 13,939 | 10,432 | 23,930 | 48,379 |
| Cash EBITDA | 60,526 | 65,691 | 113,963 | 117,766 | 223,752 |
| Taxes paid | (1,814) | (127) | (2,852) | (424) | (3,261) |
| Change in working capital, excl. forward flow commitments | (2,682) | (2,542) | 74 | 6,811 | 4,209 |
| Cash flow from operating activities before NPL and REO investments | 56,029 | 63,021 | 111,185 | 124,153 | 224,700 |
1) Comparative figures has been re-presented due to a discontinued operation, see note 12.
Estimated remaining collection, NPL
| For the quarter end | Year to date | |||||
|---|---|---|---|---|---|---|
| EUR thousand | 30 Jun 2022 | 30 Jun 2021 | 30 Jun 2022 | 30 Jun 2021 | Full year 2021 | |
| Purchased debt portfolios | 1,154,509 | 1,104,079 | 1,154,509 | 1,104,079 | 1,095,789 | |
| Estimated opex for future collection at time of acquisition | 319,223 | 298,810 | 319,223 | 298,810 | 296,290 | |
| Estimated discounted gain | 805,048 | 716,410 | 805,048 | 716,410 | 748,463 | |
| Estimated remaining collection, NPL | 2,278,780 | 2,119,300 | 2,278,780 | 2,119,300 | 2,140,543 |
Cash and cash equivalents
| For the quarter end | Year to date | |||||
|---|---|---|---|---|---|---|
| EUR thousand | 30 Jun 2022 | 30 Jun 2021 | 30 Jun 2022 | 30 Jun 2021 | Full year 2021 | |
| Cash and cash equivalents from financial position | 29,264 | 42,111 | 29,264 | 42,111 | 38,155 | |
| Cash and cash equivalents, discontinued operations | 2,791 | 2,791 | ||||
| Cash and cash equivalents | 32,055 | 42,111 | 32,055 | 42,111 | 38,155 |
Net interest bearing debt (NIBD)
| For the quarter end | Year to date | ||||
|---|---|---|---|---|---|
| EUR thousand | 30 Jun 2022 | 30 Jun 2021 | 30 Jun 2022 | 30 Jun 2021 | Full year 2021 |
| Non-current portion of interest bearing debt from financial position | 853,297 | 695,658 | 853,297 | 695,658 | 834,411 |
| Current portion of interest bearing debt from financial position | 3,404 | 135,737 | 3,404 | 135,737 | 3,845 |
| Interst bearing debt allocated to discontinued operations | 15,605 | 15,605 | |||
| Total interest bearing debt | 872,306 | 831,395 | 872,306 | 831,395 | 838,256 |
| Capitalized loan fees | (12,400) | (16,891) | (12,400) | (16,891) | (17,566) |
| Accrued interest | 3,404 | 4,657 | 3,404 | 4,657 | 3,845 |
| Treasury bonds | (36,550) | (36,550) | |||
| Nominal value interest bearing debt | 917,852 | 843,629 | 917,852 | 843,629 | 851,977 |
| Cash and cash equivalents from financial position | 29,264 | 42,111 | 29,264 | 42,111 | 38,155 |
| Cash and cash equivalents, discontinued operations | 2,791 | 2,791 | |||
| Net interest bearing debt (NIBD) | 885,797 | 801,518 | 888,588 | 801,518 | 813,821 |
Return on equity, excluding non-controlling interests, annualized
| For the quarter end | Year to date | ||||
|---|---|---|---|---|---|
| EUR thousand | 30 Jun 2022 | 30 Jun 2021 | 30 Jun 2022 | 30 Jun 2021 | Full year 2021 |
| Net profit/(loss) after tax attributable to shareholders of the | |||||
| parent company | 11,063 | 7,152 | 17,694 | 5,717 | (32,797) |
| Average equity for the period related to the shareholders | |||||
| of the parent company | 396,285 | 414,637 | 390,947 | 376,947 | 384,751 |
| Return on equity, excluding non-controlling interests, annualized | 11.2% | 6.9% | 9.2% | 3.1% | (8.5%) |
Return on equity, continuing operations, annualized
| For the quarter end | Year to date | ||||
|---|---|---|---|---|---|
| EUR thousand | 30 Jun 2022 | 30 Jun 2021 | 30 Jun 2022 | 30 Jun 2021 | Full year 2021 |
| Net profit/(loss) after tax from continuing operations | 12,463 | 8,976 | 20,116 | 8,897 | (25,393) |
| Average total equity for the period | 394,655 | 429,500 | 390,187 | 411,560 | 407,454 |
| Return on equity, continuing operations, annualized | 12.6% | 8.4% | 10.4% | 4.4% | (6.2%) |
Terms
Active forecast Forecast of estimated remaining collection on NPL portfolios Board Board of directors Cash EBITDA margin Cash EBITDA as a percentage of gross revenue Chair Chari 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 Collection on own NPL portfolios in relation to active forecast, including sale of repossessed assets in relation to book value Equity ratio Total equity as a percentage of total equity and liabilities Forward flow agreement Agreement for future aquisitions of NPLs at agreed prices and delivery Gross IRR The credit adjusted interest rate that makes the net present value of ERC equal to NPL book value, calculated using monthly cash flows over a 180-months period Group Axactor ASA and all its subsidiaries NPL amortization rate NPL amortization divided by collection on own NPL portfolios One off portfolio aquisitions Aquisition of a single portfolio of NPLs Opex Total operating expenses Recovery rate Portion of the original debt repaid Replacement capex Aquisitions of new NPLs to keep the same book value of NPLs from last period Repossession Taking possession of property due to default on payment of loans secured by property Repossessed assets Property repossessed from secured non-performing loans 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 |
| FSA | The financial supervisory authority |
| FTE | Full time equivalent |
| GHG | Greenhouse gas emissions |
| 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 |
Financial calendar 2022
| Interim report - Third quarter of 2022 | 27 Oct, 2022 |
|---|---|
| Interim report - Fourth quarter of 2022 | 17 Feb, 2023 |
Contact details
Axactor ASA (publ) Drammensveien 167 0277 Oslo Norway
The shares of Axactor ASA (publ.) are listed on the Oslo Stock Exchange, ticker ACR.
Cautionary Statement: Statements and assumptions made in this document with respect to Axactor ASA's ("Axactor") current plans, estimates, strategies and beliefs, and other statements that are not historical facts, are forward-looking statements about the future performance of Axactor. Forward-looking statements include, but are not limited to, those using words such as "may", "might", "seeks", "expects", "anticipates", "estimates", "believes", "projects", "plans", strategy", "forecast" and similar expressions. These statements reflect management's expectations and assumptions in light of currently available information. They are subject to a number of risks and uncertainties, including, but not limited to, (i) changes in the economic, regulatory and political environments in the countries where Axactor operates; (ii) changes relating to the statistic information available in respect of the various debt collection projects undertaken; (iii) Axactor's continued ability to secure enough financing to carry on its operations as a going concern; (iv) the success of its potential partners, ventures and alliances, if any; (v) currency exchange rate fluctuations between the euro and the currencies in other countries where Axactor or its subsidiaries operate. In the light of the risks and uncertainties involved in the debt collection business, the actual results could differ materially from those presented and forecast in this document. Axactor assumes no unconditional obligation to immediately update any such statements and/or forecasts.
