q1 2019 earnings presentation - hayanegotiations with sareb on potential new contract ongoing....

Haya Real Estate 1Presentación Corporativa 1

Q1 2019

Earnings

Presentation

23 May 2019

Haya Real Estate 222

Disclaimer

The purpose of this presentation is purely informative. The information contained in this presentation is subject to, and must be read in conjunction with, all other publicly available information, including,

where relevant any fuller disclosure document published by Haya Real Estate, S.L. (together with any of its subsidiaries, “Haya Real Estate”). Any person at any time acquiring securities must do so only on the

basis of such person’s own judgment as to the merits or the suitability of the securities for its purpose and only on such information as is contained in such public information having taken all such profession

or other advice as it considers necessary or appropriate in the circumstances and not in reliance on the information contained in this presentation. No investment activity should be undertaken on the basis of

the information contained in this presentation. In making the presentation available, Haya Real Estate gives no advice and makes no recommendation to buy, sell or otherwise deal in any securities or

investments whatsoever.

Neither this presentation nor any of the information contained therein constitutes an offer to sell or the solicitation of an offer to buy any securities.

This presentation contains forward-looking statements regarding Haya Real Estate’s financial position and plans for future operations. All statements other than statements of historical facts may be forward-

looking statements. These forward-looking statements speak only as of the date of the notice and are subject to a number of factors that could cause actual results to differ materially from any expected

results in such forward-looking statements. Haya Real Estate expressly disclaims any obligation or undertaking to update or revise any forward-looking statement (except to the extent legally required).

Haya Real Estate uses certain alternative performance measures (APMs), which have not been audited, Adjusted EBITDA and Free Cash Flow, to benchmark and compare performance, both between its own

operations and as against other companies for a better understanding of Haya Real Estate financial performance. These measures are used, together with measures of performance under the International

Financial Reporting Standards (IFRS), to compare the relative performance of operations in planning, budgeting and reviewing the performance of its business. Haya Real Estate believes that EBITDA-based

and other measures are useful and commonly used measures of financial performance in addition to net profit, operating profit and other profitability measures under IFRS because they facilitate operating

performance comparison from period to period and company to company. By eliminating potential differences in results of operations between periods or companies caused by factors such as depreciation

and amortization methods, historic cost and age of assets, financing and capital structures and taxation positions or regimes, Haya Real Estate believes that EBITDA-based and other measures can provide a

useful additional basis for comparing the current performance of the underlying operations being evaluated. For these reasons, Haya Real Estate believes that EBITDA-based and other measures are regularly

used by the investment community as a means of comparison of companies in the industry. However, these measures are considered additional disclosures and in no case replace the financial information

prepared under IFRS. Moreover, the way Haya Real Estate defines and calculates these measures may differ to the way similar measures are calculated by other companies. Accordingly, they may not be

comparable.

Regarding any data which may have been provided by third parties, neither Haya Real Estate, nor any of its administrators, directors or employees, either explicitly or implicitly, guarantees that these

contents are exact, accurate, comprehensive or complete, nor are they obliged to keep them updated, nor to correct them in the case that any deficiency, error or omission were to be detected. Moreover, in

reproducing these contents in by any means, Haya Real Estate may introduce any changes it deems suitable, may omit partially or completely any of the elements of this document, and in case of any

deviation between such a version and this one, Haya Real Estate assumes no liability for any discrepancy.


Today´s Presenters

Carlos Abad Rico

CEO & Director of the

Board

Bárbara Zubiría Furest

CFO


Agenda

Business Review

01

02

03 Financial Review

Key Highlights


Q1´19- Key Highlights1

✓ Transaction Volumes of €846.9MM in Q1’19, driving revenues to €59.7MM, 7% increase vs Q1´18

✓ New SLA contract signed in March 2019, for the management of the “Apple” REO portfolio (JVCo

between Cerberus and Santander). Over 24K new REO assets under management, or €2.2BN

✓ Negotiations with Sareb on potential new contract ongoing. Strong focus on service delivery under

existing contract.

✓ Strong focus in the quarter on preparing for the Divarian integration, with Business Purchase

Agreement signed in April. The culmination of this transaction consolidates Haya as the leader in

the Spanish real estate servicing market

✓ Results in the quarter impacted by growth in operating and personnel costs, driving Adjusted

EBITDA to €19.5MM. Costs increase linked to strong REO activity and transitorily impacted by

BBVA servicing through Divarian

Haya Real Estate 6Haya Real Estate

2. Business Review


Divarian Integration2• Servicing business / operational assets and capabilities (and related cost base)

transferred to Haya

• Purchase price of 1€

• Divarian, as “Prop Co.”, will remain with core corporate functions

• Servicing contract (SLA) between Divarian and Haya, will be in effect on June

1st, for 8 years and similar terms to BBVA´s SLA

• Haya will directly service BBVA´s assets (currently subcontracted to Divarian)

Highlights

Key PrioritiesEnsure no business

disruption for both

BBVA and Divarian

Clearly defined

integration plan

focused on business

continuity to

decouple systems and

leverage on

combined

capabilities to

minimise business risk

Minimise

operational risk with

regular work stream

contact and frequent

team reviews

Strong

commercial focus

Secure retention

of key talent

• ~€10BN1 GBV (€6.0BN1

Appraisal Value)

• +60,000 REO units

• +340 employees

• +150 BPO FTEs

(1) Includes €1.3BN AuMs that will be transferred from BBVA to Divarian


Business Rationale2

Consolidation of a company with a clear business and client service orientation, with new professional

opportunities

Creation of leading servicer in Spain with more than 221k REO assets under management

Diversified client base with long term contracts

Services which cover the entire value chain in the management of REDs and REOs

Complementary geographical presence and capillarity throughout the Spanish

territory with access to areas with higher volume of assets (Cataluña, Valencia, Madrid,

and Málaga)

Combination of technical, commercial and human strengths, which will allow the expansion

into new businesses (NPLs, Socimis/REITs) and new clients

Leader in

Spain

Merger of

Capabilities

Complementary

businesses


Combined capabilities between HRE & Divarian2

• Independent multi-client servicer with a solid

financial track record

• Leader in debt management and real estate

assets (REDs and REOs)

• Revenues coming from a variety of clients

(Bankia, BBVA, Liberbank, Cajamar, ING, Sareb,

Cerberus and other investment funds)

• Integral management across the full loans and

real estates assets’ value chain

• Company dedicated to real estate assets

management

• Prop. Co. - Joint Venture between Cerberus

(80%) and BBVA (20%)

• Present across all national territory through 6

geographical divisions with significant capillarity

• Diversification of asset types (residential,

industrial, commercial, land)

20%80%

Aum (€M)

FTEs (#)

Aum (#)

Divarian + Haya

221,000

.

46,6831

< 700

Between 700 and 2.000

More than 2.000

1,240

90%

72% 28%

10%

AuM Location

(1) BBVA and Divarian perimeters included at appraisal value

Haya Real Estate


Sareb - Contract Status 2Existing servicing contract Delivery under Existing contract

#1 Ranked in latest client satisfaction survey

Strong compliance with SLA requirements

Top ranked in latest external KPI benchmark for

REDs

Very strong budget over achievement in

Q1´19 and top results achieved in 2018

• Existing contract matures in December 2019

• Will continue working with Sareb on business as usual

under existing contract terms until the maturity of the

contract, December 31st 2019.

• Six months notice of non-renewal expected on June

30th; otherwise, one year automatic renewal (end of

2020)

• Discussions on renewal process started in February

• Sareb has formally launched Project Esparta and

communicated to us their desired servicing business

model and strategy

• 2019 RED Volumes expected to be impacted by

Sareb’s recently communicated business strategy

(strong focus on margins), with growth to come from

REO Conversion and REOs

Strong and healthy client relationship based on high quality of service offered


• Reduce activity in loan portfolio

• Sharp reduction in institutional transactions (portfolio sales) due to greater

focus on margin

• Drive transformation from loans into real estate assets; double Transformation

from €1.8MM to €3.8MM (2019-2020)

• Shift in the volume mix (REOs vs REDs) due to the sharp increase in

Transformation

• Renegotiate current business model with servicers

• Greater efficiency in the sales cycle

• Specialist management by Sareb of certain areas

• Grater control over information via development of

internal platforms

• Five regional offices

• In-depth understanding of properties in local markets

• Offer tailored to demand in each region

• More efficient debtor management

• In-house and associated development

• Land planning management

• Specialist management of unique properties

• Boosting sales in difficult areas

Sareb – Future Strategy2

Sareb´s

recently

communicated

future business

strategy

Source: Sareb. “2018 Annual Activity Report” and “2019 business strategy” presentation

Loans

Efficiency

Maintain /

increase value

of Properties

Core

strategic

goals

Servicing

Regional

Management

Haya Real Estate 12Haya Real Estate

3. Financial Review


€46,683MM+18% YoY

Key Financial Highlights – Q1´19

Assets Under

Management

3

€846.9 MM-5% QoQ

Transaction

Volumes Q1´19

€193.5MM-29% QoQ

RED Volumes

Q1´19

Revenues Free Cash Flow2 Net Debt

REO Co. Volumes

Q1´19

REO Volumes

Q1´19

€329.6MM+11% QoQ

€323.8MM-1% QoQ

€59.7MMLTM €277.6MM

€2.8MMLTM €105.2MM

€455.0 MM

Avg. Volume serv. fee 3.47%

Avg. Mangmt. fee 0.21%

LTM Cash conversion 82%

Adjusted EBITDA1

€19.5MMLTM €127.7MM

LTM EBITDA margin 46% Leverage ratio 3.6x

(1) Adjusted EBTIDA is the sum of GAAP operating profit plus D&A, adding back €2.4MM of non recurring costs (2) Free Cash Flow is defined as Adjusted EBITDA less capital

expenditures and change in working capital.


Assets Under Management3

Total 39,652

AuMs increased by €7BN compared to December 2018 mainly due to the Divarian, Apple contribution and the inflows from existingcontracts partially offset by the natural evolution of the Sareb portfolio (closed perimeter)

Asset under Management evolution (GBV1) (€ MM)

RED REO

23,501

16,151

AuMs EoP 2018 Inflows from

existing

contracts

Apple portfolio Outflow REO Co Inflow REO Co Outflows from

recoveries /

sales

AuMs EoP Q1´19

Increase Decrease

719

176 (245) 220 (495)

23,677

18,252

Total 41,929

(794) 895

2,200

(299)

Divarian

4,7541

Total 46,683

(1) BBVA and Divarian perimeters included at appraisal value; (2) BBVA´s AuMs includes €1.3BN that will be transferred to Divarian

2,200


Divarian / BBVA transaction: Resulting SLAs3

(1) In effect from June 1, 2019; (2) Includes €1.3BN AuMs that will be transferred from BBVA to Divarian

AUMs

Perimeter

Term

REO/RED

Exclusivity

Upfront payment

Fee structure

Cerberus

(80%)

BBVA

(20%)

• €6.0BN2 (Appraisal value)

• ~€10BN (estimated GBV)


Stock + Future Flow Stock

• 8 years +2 yr extension • 8 years + automatic annual extensions

Termination fee

REO REO

- -

• Sales fee/Asset management fee/ Portfolio sales

fees/ Asset Inscription fees/ Rent fees

• Sales fee/Asset management fee/

• Portfolio sales fees/ Rent fees

1

• €1.6BN (Appraisal value)

• ~€2.6BN (estimated GBV)



272.0193.5

296.8

329.6

326.4

323.8

895.2

846.9

Q1 ´18 Q1´19

REDs REO Co REO

• BBVA contribution in Q1’19

with no corresponding impact

in Q1´18

• Strong performance in Sareb

(+74%) due to an increase in

retail REO sales

• Lower activity in Cajamar

and Bankia due to large

portfolios sold in Q1’18

(€62MM)

• Lower performance in

Liberbank impacted by

significant bulk REO sales in

Q1’18

Transaction Volumes3REDs Transaction

Volumes REO Conversion

Transaction Volumes REOs Transaction

Volumes

€193.5MM

-29%

• No recoveries in Bankia in

Q1‘19 due to novation of the

contract in April 2018 which

removed REDs from

perimeter

• Lower recoveries in Sareb

impacted by Sareb’s new

business strategy (strong

focus on margins)

• Strong performance in

Cerberus Servicing Contracts

due to new portfolio

awarded in H2 ’18

• Continued strong

performance in REO

Conversion mainly due to the

strong activity in Sareb

resulting in a sharp increase in

DILs and Bankruptcies closed

• Lower performance in

Cajamar in REOCo as a result

of less focus by client in DILs

during Q1’19 compared to

Q1’18

€329.6MM

+11%€323.8MM

-1%

Transaction volumes comparison

(€ MM)

(%) of total

(30%)(23%)

(39%)

(38%)

(36%)

(33%)

-5%

4,503 4,746LTM +5%


32.129.4

20.523.3

3.37.1

55.9

59.7

Q1 ´18 Q1´19Volume fee Management fee Other revenues

• Management fee increased by 14% mainly due to BBVA, Bankia, Liberbank and other clients contribution which

have offset the decline in Sareb due to the closed nature of the perimeter under management

3

• Volume fee decreased by 8% mainly due to :

• Decrease in REDs volume fee impacted by the novation of the Bankia contract and the lower activity in Sareb

• Decrease in REO Co fees impacted by Cajamar partially offset by the good performance in Sareb

• Increase in REOs volume fee impacted by BBVA contribution and the good performance in Sareb

• The average volume servicing fee as % of volumes was 3.47% mainly due to the weight decrease in REDs and in

REO Co which have contractually lower % volume fee

Revenues Comparison

Revenues

(€MM) Volume fee

Q1´19:

€29.4MM

Q1´18 :

€32.1MM

Management fee

Breakdown

by product

Other Revenues

• Other revenues increased by 116% mainly due to the onboarding fee of the Apple portfolio and ancillary

services rendered to Bankia and BBVA which are partially offset with the corresponding impact in operating

expenses (direct costs).

Revenues increased by 7% due to the increase in management fees and other revenues mainly impacted by the BBVA contribution during the

first three months of 2019

(37%)(39%)

(49%)(57%)

(6%) (12%)

(%) of total

3.47%3.59%

% average volume servicing fee

RED

41%

REO

Co

17%

REO

42%

RED

32%

REO Co

17%

REO

51%

+7%

262.8 277.6LTM +6%


• The new servicing contracts awarded in 2018 have

increased number of FTEs.

• Compliance, Internal Audit, Data and Process Quality,

Finance & Data Analytics departments have been

reinforced during 2018 which impacts the personnel in 2019.

• Increase in intermediation costs (channel costs) due to the

LTM strong performance in REOs volumes

• Increase in cost of agencies due to Bankia, Sareb and BBVA

contribution which are offset with the corresponding

revenues invoiced to the clients

• Increase in professional services impacted by certain

consultancy and business process outsourcing costs

associated to new onboardings

• Decrease in operating expenses mainly due to IT, temporary

workforce and customer support

• Nevertheless, during Q1´19 the operational expenses have

decreased compared to Q4´18 due to a reduction in

intermediation and professional services costs

147.8

4.4 6.3

13.025.2

9.8

127.7

LTM Q1´18

Adjusted EBITDA

Volume fee Management fee Other revenues Operating costs Personnel costs LTM Q1´19

Adjusted EBITDA

Adjusted EBITDA LTM decreased 14% year-over-year explained by an increase in operational and personnel costs due to the strongperformance in REOs and new FTEs hired

Adjusted EBITDA bridge3

(1) Adjusted EBTIDA is the sum of GAAP operating profit plus D&A, adding back €6.2MM of non recurring expenses .

1

% Adjusted EBITDA LTM margin

1 Operating costs impacted by:

Personnel costs impacted by:

Adjusted1 EBITDA Bridge (€ MM)

2

LTM 56% LTM 46%

20.1

1

2


448.2

455.0

2018 Q1´19

107.1

20.1

4.923.1

105.2

LTM Q1´18 FCF Adjusted EBITDA Capex Change in working

capital

LTM Q1´19 FCF

Free Cash Flow and Net Debt 3Free cash flow decreased LTM by 2% leaving a leverage ratio of 3.6x as of March 2019

(1) Free Cash Flow is defined as Adjusted EBITDA less capital expenditures and change in working capital. (2) Adjusted EBTIDA LTM is the sum of GAAP operating profit plus

D&A, adding back €6.2MM of non recurring costs.

Free Cash

Flow1

Comparison

LTM 2018 LTM 2019

Adjusted EBITDA2 147.8 127.7

Capital expenditures paid -8.4 -13.3

Change in working capital -32.3 -9.2

Free Cash Flow 107.1 105.2

% Cash Conversion: FCF1 / Adjusted EBITDA2

(€ MM)

72% 82%

(€ MM)

Free Cash Flow Main Highlights

Main

Highlights

• Leverage ratio of 3.6x

• Cash position as of Q1´19 of €18MM

• FCF in Q1’19 weaker due to working capital seasonality,

and capex associated to new Headquarter offices

• Working capital improvements LTM, with strong push in

collections still to come

Leverage ratio: Net debt / LTM Adjusted EBTDA2

3.4x 3.6x

(€ MM)

• Improvement in

collection process in

Sareb and Cajamar

• Contribution from new

clients such us

Liberbank

• €2.5MM capex

paid during Q1´19

due to the new

Headquarter

offices in Madrid

Haya Real Estate 20

Calle Medina de Pomar, nº 27. CP 28042, Madrid

901 11 77 88 | www.haya.es

q1 2019 earnings presentation - hayanegotiations with sareb on potential new contract ongoing....

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