Axactor - Further cost reductions to be announced in H1’21
Q4’20: Cash EBITDA ~EUR 64m, +3% vs. ABGSCe Capex likely back-end loaded during 2021 Further cost reduction may warrant valuation uplift Revaluations blurred in Q4, but cash EBITDA was better Reported EBITDA of EUR 21. 3m was 8% below ABGSCe due to higher than expected negative revaluations in the quarter, while the margin was in-line. Cash EBITDA was 3% ahead of ABGSCe due to higher REO sales and lower costs, as gross revenue from NPLs and 3PC was in-line.
Gross revenue was EUR 94. 9m in Q4, 1% ahead of our estimate and up 14% q-o-q. Despite an all-time high gross collection in NPLs in Q4, the collection was still 4% below the active forecast.
Given the revaluations we anticipate that performance should fluctuate by ~100% going forward. Better REO sales, 3PC margin and back-end loaded capex Given that gross revenue within NPLs and 3PC were in-line with our estimates in Q4, and the fact that we have already factored in somewhat increasing activity in 3PC in 2021, we make few changes to our previous estimates. But it is supportive to note that the company has already seen signs of increasing activity in 3PC new sales lately.
In brief, we factor in (1) somewhat better REO sales given the positive revaluation and higher sales in Q4, (2) slightly lower capex and more back-end loaded capex in ’21e (higher in ’22e) and (3) a 2-3pp better contribution margin in 3PC for ’21-22e, given the consistent beat on this metric in Q3 and Q4 2020. New cost reduction program a potential delta in H1’21 As part of its new strategy, where the focus has shifted from a scale first focus to a focus on increasing the return on equity, Axactor initiated a cost reduction program during Q4’20. The results of the cost reduction program will be announced during H1’21 and are “expected to be meaningful” according to the Q4 report.
This could serve as a positive delta to estimates as we have not factored in margin expansion from other sources than scale, business mix and current performanc.
