2018 Results April 25th, 2018 1 Disclaimer This presentation - - PowerPoint PPT Presentation

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2018 Results

April 25th, 2018

Disclaimer

2 This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and the securities laws of other jurisdictions. In some cases, these forward-looking statements can be identified by the use of forward-looking terminology, including the words "believes", "estimates", "aims", "targets", "anticipates", "expects", "intends", "plans", "continues", "ongoing", "potential", "product", "projects", "guidance", "seeks", "may", "will", "could", "would", "should" or, in each case, their negative, or other variations or comparable terminology or by discussions of strategies, plans, objectives, targets, goals, future events or intentions. These forward-looking statements include matters that are not historical facts. They appear in a number of places throughout this presentation and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, competition in areas of our business,

• utlook and growth prospects, strategies and the industry in which we operate. By their nature, forward-looking statements involve risks and uncertainties

because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity and the development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this presentation. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward- looking statements contained in this presentation, those results or developments may not be indicative of results or developments in subsequent periods. For a description of important factors that could cause those material differences, we direct you to the section of our Annual Report entitled "Risk Factors". Any forward-looking statements in this presentation are based on plans, estimates and projections as they are currently available to our management. We undertake no obligation, and do not expect, to publicly update or publicly revise any forward-looking statement, whether as a result of new information, future events or otherwise. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this presentation and in our Annual Report.

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Sustained growth whilst maintaining strict investment discipline

Strong Cash EBITDA growth to €93.5m in FY 2018 (up 6% YoY), pro-forma DSO acquisition(1)

• Strong dynamics coming from Debt Servicing  +12% in terms of revenues
• Increase in Gross collections in spite of lower investment activity (strong performance of the backbook)  Collections are up by 3%

Significant diversification and rebalancing of our business model

• 56% of our business now coming from servicing revenues vs 25% LY (Q4(2) 2018 vs. 2017)
• Extension beyond the banking sector opening new business development opportunities (e.g. insurance, utilities, telco etc.)
• First geographic diversification to accompany our existing customers with the acquisition of Serfin – a debt servicer in Italy

High level of liquidity & contained leverage despite sustained M&A activity in 2018(4)

• Net debt at 3.0x(3) - one of the lowest amongst European peers
• Strong cash generation supported by capital light activities
• Significant dry powder, with €92m of cash and €50m of undrawn RCF, readily available to seize attractive investment opportunities

Integration of DSOgroup on track to create the No.1 one-stop shop in the French CMS market

• Group’s new governance in place and integration workstreams are on track
• Estimated synergies from the merger at €4.7m, in line with sizing at due diligence

(1) Pro-forma view considers full year contribution for DSO whereas IFRS view only considers DSO

figures from acquisition. Excludes Serfin

(2) Calculated based on Q4 figures - pro-forma DSO and Serfin (3) Considering MCS&DSO pro-forma including Serfin consolidation & merger synergies materialization (4) Supported by significant reinvestment from shareholders and management

Key Highlights of FY 2018

88.2 93.5 46% 46% 2017 2018

Cash EBITDA Cash EBITDA margin (2)

(€m)

113.5 116.9 73.5 82.0

2017 2018

Gross collection Servicing revenues 198.9 187.0 187.0 (€m)

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(1) Cash EBITDA margin calculated as Cash EBITDA as a percentage of Total Cash Revenues. (1)

KEY POINTS

• Robust performance throughout the year
• Cash EBITDA Margin remained stable at 46%

Total cash revenues Cash EBITDA & Cash EBITDA Margin

Sustained growth: pro-forma MCS&DSO P&L evolution

46% 46%

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+12%

increase of Servicing revenues to reach €82m in 2018(1)

(1) MCS&DSO pro-forma view excluding Serfin (2) MCS&DSO Q4 pro-forma view – ratio on net revenues including Serfin (3) DSOgroup Servicing customers evolution only – FY 2018 pro-forma view

KEY POINTS

• Robust increase of servicing revenues at 12% in 2018
• During the last 4 years, our number of customers has increased by 5% on

average every year (3)

• Customers from Banking represent less than 50% of the total customers

in number, Industry and other non banking customers number is growing fast.

500

CUSTOMERS

+98%

CUSTOMER FIDELITY SINCE 10Y

+56%

OF MCS&DSO NET REVENUES (2)

73.5 82.0

2017 2018

(€m)

Servicing revenues Servicing revenues per sector

Strong Servicing dynamics

Insurance 14% Industry and

• ther

11% Banking 47% Telco 10% Saas and IT services 4% Utilities 14%

61.9 42.1 2017 2018

Portfolio acquisitions 450 403 (€m) ERC 120M

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Continued strict investment discipline (2)

(2) We intend to continue leveraging our robust due diligence process and analytics tools to ensure that we

• nly acquire portfolios of non-performing and performing loans that present an attractive risk-adjusted

return

2.1 2.2 2.3 2.9 2.8 2.3 1.9 1.8 1.6 1.1 0.8 0.5 0.2 3.0 2.7 2.3 2.3 2.2 1.9 1.7 1.8 1.7 2.1 2.3 2.5 3.3 3.3 2.9 2.6 2.6 2.4 2.0 1.8 1.8 1.7 1.9 1.5 1.7 1.9 1.6 1.8 1.9 1.8 1.8 1.8 1.8 1.8

Prior 2007 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Actuals 120m implied Actuals+120M MM Due Diligence

+3%

increase in collections

(1) MCS&DSO pro-forma view

• In the first instance, conservative collection forecasts were applied to recent DSO portfolios as the

group is still performing a thorough review of these

Portfolio Acquisitions & 120m Gross ERC GMM by Vintage (1)

Debt Purchasing: Strong backbook performance softens the impact of strict investment discipline

KEY POINTS

• Continued strict investment discipline led to decreasing investment in 2018
• GMM at underwriting was in line with historical levels at 1.8x, on porfolios presenting an attractive risk profile
• However, 2018 Collections exceeded that of 2017 thanks to a strong backbook performance, with earlier

vintages continuing to bring solid cash flows.

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Capital light activities now account for 56% of our revenues …and they are spread accross a broad spectrum of industries…

Banking 100%

2017 Servicing

(MCS Groupe)

Insurance 14% Industry and

• ther

11% Banking 47% Telco 10% Saas and IT services 4% Utilities 14%

2018 Servicing

(MCS&DSO(2))

(1) MCS&DSO Q4 pro-forma view – ratio on net revenues including Serfin (2) MCS&DSO pro-forma view excluding Serfin 75% 25%

2017 (MCS Groupe)

% Debt purchasing % Debt servicing

44% 56%

2018 (MCS&DSO)

(1)

Significant diversification & rebalancing

KEY POINTS

• Strong business diversification with

Servicing providing stable, capital light revenues

• Industry diversification opens growth and

business development opportunities beyond banking market (where dynamics remain favorable)

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Snapshot on Italy

KEY POINTS

• One of the most attractive European markets in terms of NPL
• Strong business connection between France and Italy, with

significant cross-boarder presence of large corporates

• First venture outside France for our Group.
• Serfin is an ideal first step:
• Servicing business (no underwriting risk)
• Highly committed Senior management
• Right size / entry price
• Compelling customer loyalty with longstanding relationships and

an excellent customer satisfaction level

• Competitive and cost-efficient business model

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3.0x

Leverage on Cash EBITDA

• incl. Serfin &

synergies

Dec-18

Pro-forma capital structure & leverage position - FY 2018

KEY POINTS

• 3.0x pro-forma leverage ratio – one of the lowest amongst peers in Europe
• Leverage position maintained well within guidance despite heavy M&A activity (DSO, Serfin)
• Strong opening liquidity position:
• Our available cash went up from €52m to €92m between 2017 and 2018
• Combined with our €50m untapped RCF, this gives us significant firepower to seize attractive investment
• pportunities in the future

MCS & DSO Serfin @ 80%(1) Total with Serfin Synergies impact(2) Total with Synergies Currency: € 000 Dec-18 Dec-18 Dec-18 Dec-18 Dec-18 High Yield Bond 378.1

• 378.1

378.1 Other loans 4.7 1.3 6.0 6.0 Co-investors Debt 2.5

• 2.5

2.5 Others 7.2

• 7.2

7.2 Gross Debt 392.6 1.3 393.9 393.9 Cash and cash equivalents 104.0 1.8 105.9 105.9 Restricted cash 11.6

• 11.6

11.6 Cash and cash equivalent excl. restricted cash 92.4 1.8 94.2 94.2 Net Debt 300.2 0.5

• 299.6

299.6 LTM CASH EBITDA 93.5 1.9 95.5 4.7 100.1 Leverage on Cash EBITDA 3.2 3.1

• 3.0

(1) Cash EBITDA considered for 80% (2) To be generated from 2019

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3.1x 3.5x 4.0x 4.1x 4.3x 4.5x 5.1x

Q4 2018 B2Holding Arrow Cabot Intrum Hoist Lowell

Source: Latest company filings 1) Servicing revenue contribution for MCS&DSO Group corresponds to Q4 proforma view including Serfin 2) Net debt / Cash EBITDA adjusted. 3) Customer deposits included in net debt calculation. 4) Servicing revenue contribution to Cash Income.



Prudent target leverage ratio of 2.5x – 3.5x

Servicing revenue contribution (as % of net revenues)(1) 13% 25% 21% 52% 3% 20%(4) 56%(1)

(2) (3)

Net Debt / Cash EBITDA (LTM) as of Dec-18

Diversified business model & conservative leverage profile vis-a-vis pan-European peers

11

1) Synergies of c.€4.7m expected to be fully-phased in within 24 months from the consummation of the Acquisition 2) Cash EBITDA pro-forma for MCS&DSO including Serfin as of LTM Dec-18. 3) Based on the €270m Senior Secured Notes (4.25%), €120m Senior Secured Notes (5.37%), €50m undrawn RCF (3.25% with a commitment fee on the undrawn amount equal to 35% of the margin). 4) Income tax expense estimate for MCS Groupe and DSO based on 2018 results. 5) Capital expenditure for MCS and DSO in LTM Dec-2018. 6) Calculated as year 1 pro-forma estimated collections less estimated year 11 collections as of Dec 31, 2018, divided by a 120m 2.0x Gross Money Multiple.

4.7

• 20.0

40.0 60.0 80.0 100.0 120.0

Cash EBITDA (2) Cash interest (3) Cash Tax (4) Capital expenditure (5) Cash after debt service Steady State Portfolio Acquisitions (6) Free Cash Flow Generation

100.1

• 19.8
• 2.7
• 4.0
• 46.4

73.5 27.1

(1)

Illustrative Pro-forma Free Cash Flow generation (LTM Dec-18)

Towards a more cash-generative business model

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• Increased use of offshore internal development capabilities instead of France-based

external resources

• Further offshoring and rationalisation of other functions (operations, support, etc.)
• Rationalisation of combined overheads, combined purchases and office spaces
• Additional collections on MCS’s acquisitions coming from DSO’s specific capabilities
• n low balance consumer loans

2 3 4 1

Bottom up Synergies estimate breakdown

IT Offshoring & others Overheads, purchasing & office spaces Total costs synergies Front Book collections Total synergies Current progress To achieve

1.6 1.1 1.0 3.7 1.0 4.7

1 2 3 4

(€m)

Synergies: significant value creation

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Appendix

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Highlights

€m 2017 2018 Variation (%) Gross Collections 113.5 116.9 3% Servicing Revenues 73.5 82.0 12% Total Cash Revenues 187.0 198.9 6% Professional fees and services (23.0) (27.0) 18% Personnel costs (50.3) (54.9) 9% Committed costs (25.5) (23.4)

• 8%

Total costs (98.8) (105.4) 7% Cash EBITDA 88.2 93.5 6% Cash distributions to SPV co-investors (1.4) (1.2)

• 11%

Attributable Cash EBITDA 86.8 92.3 6% Cash EBITDA Margin 46% 46% Full Year

Financial Performance pro-forma MCS & DSO FY 2018

(1)

(1) Excludes Serfin. FY18 Serfin revenues reached €12,1m and cash EBITDA reached €2.4m, 80% of which being consolidated in MCS&DSO group

49 45 42 2016 2017 2018

Portfolio acquisitions 377

368 403 (€m)

ERC 120M

56.3 67.9 75.4 2016 2017 2018

Cash EBITDA Cash EBITDA margin (1) 57% 58% 55% (€m) 83.4 93.2 97.6 8.5 18.3 37.2 91.9 111.5 134.8

2016 2017 2018 Gross collections Servicing revenues

12% 25% 38% (€m) Servicing as % of net revenues

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Portfolio Acquisitions and 120m Gross ERC Cash EBITDA and Cash EBITDA Margins Total Cash Revenues

Continued strict investment discipline

1) Cash EBITDA margin calculated as Cash EBITDA as a percentage of Total Cash Revenues.

Solid growth leading to strong deleveraging - Louvre Bidco consolidated figures

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Highlights

21% growth in cash revenues, up to €134.8m between Dec-17 YTD and Dec-18 YTD

• In 2018, DSO contributed in IFRS consolidated accounts for €7m in

terms of collections and €16m in terms of servicing

• On MCS scope only, performance remains strong:
• collections overall increased by 2% including a good backbook

performance (+6%) in Dec-18 YTD from comparable period in

• 2017. Given low level of acquisition, Front book performance

decreased of 45% to €4.7m on the same period.

• On MCS scope only, servicing revenues increased by 14% (vs.

Dec-17 YTD)

• wing

to balanced contribution from both performing (particularly the CIF contract) and non-performing servicing activities

• Costs remained stable including:
• Professional fees and services decreasing by €0.8m in 2018

from comparable period in 2017 (-8%)

• Personnel costs increasing by €1.5m (+7%)
• Committed costs decreasing by €0.7m (-6%)

As a result, Attributable Cash EBITDA reached €74.2m (+12% YoY growth)

• Cash EBITDA margin at 55% down from 60% last year given the

higher part of Servicing following DSO integration. If considering Pro- forma view MCS&DSO, Cash EBITDA margin stands flat to 46%.

Key Financials

€m 2017 2018 Variation (%) Gross Collections 93.2 97.6 5%

• Attr. Gross Collection

89.5 96.4 8% Non Attr. Gross Collection 3.7 1.2

• 66%

Servicing Revenues 18.3 37.2 103% Total Cash Revenues 111.5 134.8 21% Professional fees and services (9.1) (12.9) 42% Personnel costs (21.1) (31.2) 48% Committed costs (13.5) (15.3) 14% Total costs (43.6) (59.4) 36% Cash EBITDA 67.9 75.4 11% Cash distributions to SPV co-investors (1.4) (1.2)

• 11%

Attributable Cash EBITDA 66.5 74.2 12% Cash EBITDA Margin 60% 55% Full Year

Financial Performance of Louvre Bidco (consolidated figures)

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€72.8m

Net cash flows from operating activities

Dec-18 YTD

€92m

Closing cash (2)

Dec-18 YTD

• Net cash flows from operating activities increased in line with the growth of our business

and our Cash EBITDA Figures (+€75.4m)

• Net cash flows from investment activities impacted in 2018 by DSO acquisition
• In Q4-2018, investments are considering DSO & Serfin acquisition for €152m, net of cash acquired
• Portfolio acquisitions in 2018 reached €22m, including DSO Q4 acquisitions
• Net cash flows from financing activities evolution between December 2017 & December 2018 is attributable to:
• Full reimbursement, which happened in March 2018, of the vendor loan inherited from our previous capital structure for €5.7m,
• the changes in the Group Capital structure and notably the issuance of a second Senior Secured Notes for €120m, issued in 2018 and due 2024, at three-month

EURIBOR plus 537.5 basis points per annum. €m déc-17 déc-18 Variation (%) Net cash flows from operating activities 18.0 72.8 305% Net cash flows for investment activities (160.3) (187.6) 17% Net cash from financing activities 194.3 166.8

• 14%

Net change in cash and cash equivalents 52.0 52.0 0% Opening cash and cash equivalents 0.0 52.0 Closing cash and cash equivalents 52.0 104.0 100% Full Year

(1)

(2) €104 m if including Restricted cash. (1) Cash statement excluding Serfin

MCS Group consolidated cash flows – FY 2018