Axactor SE - Update on Operations and Finance

Axactor acts responsibly and in compliance with rules and recommendations from national and local authorities in all the six countries with operations, both to protect its employees and their families and local communities, and to ensure that the company remains operational for its customers, debtors and partners. So far, the company has registered zero cases of COVID-19 among its employees.

Operational update

The company has activated business continuity plans in response to the situation and has to date remained in full operation in all countries. Most of the employees are now working from remote locations, with exception of certain critical roles that require physical presence. The call centres in Valladolid and Alicante in Spain have remained open.

Axactor has since the beginning in 2015 been built as a technology and IT-driven company with secure and scalable digital solutions at the core of its operating model. Axactor’s cloud-based collection systems are supported by outsourced IT-solutions, and in combination with a lean and flexible operating model this has enabled Axactor to remain in full operation despite the current extraordinary environment.

As the COVID-19 virus continues to spread, Axactor is working on the assumption that the macroeconomic situation may worsen further in the coming months. The company has not yet implemented temporary workforce reductions, although this is considered as part of the ongoing cost savings initiatives to adapt to the situation.

Responsible Collection

Axactor is observing lower collection performance as a result of the comprehensive COVID-19 measures, particularly in Italy and Spain. This is both due to a worsened financial situation for many debtors but also slower processes at bailiffs and public notary offices. The Italian operation, which is hardest hit, accounts for approximately 5% of revenue and a lower percentage of the results. In Spain, representing approximately 45% of revenue, the closure of public offices also affects the completion of REO sales agreements and realization of secured assets. The collection performance has so far held up better in Germany and the Nordics.

Axactor acknowledges that the debt management and collection industry plays an important role in society, not least in times like these. “In the current environment, Axactor is committed to finding the best possible solutions for our customers, debtors and partners. Sustainability begins within the organization, and everyone from the top management throughout the entire organization are accountable for conducting business in an ethical, sustainable and socially responsible manner. We remain confident that we are equipped to navigate through this economic crisis,” says Endre Rangnes, Axactor CEO.

Overall, Axactor sees a significant revenue shortfall in the first quarter and a further revenue decline in the second quarter 2020, although the total effects are still too early to quantify. Looking further ahead into the second half of the year, the company expects the situation to generate increasing 3PC volumes due to a higher volume of non-performing loans on the customers’ balance sheets.

Financial position

Axactor had total equity of EUR 378 million at the end of 2019 and an equity ratio of 30%. The cash balance was EUR 72 million. The equity was further strengthened through an equity issue in February 2020, which generated gross proceeds of approximately EUR 51 million.

Even though revenue and EBITDA levels in the first quarter of 2020 will fall significantly below forecasts, the operational cash flow from the business will contribute positively to liquidity.

The challenging global economic outlook and highly volatile financial markets will likely mean that an increasing amount of non-performing loans will come to the market at significantly lower prices. Due to the current high uncertainty, Axactor will nevertheless hold back on investments in new NPL portfolios while remaining committed to already entered forward flow agreements. At the end of 2019, Axactor had entered into forward flow agreements with an estimated capital requirement level of EUR 178 million for 2020.