Quarter presentation. Together with me, I have our CFO, Nina Mortensen, which will present the financials. The presentation will be divided into four parts. First, I will take you through Q1 highlights, but this time I will also give some attention to the industry's challenges and how Axactor is responding to these. Then Nina will go through the financial update before I present an updated outlook. As always, we will round off with a Q&A session. Let's move to slide three and have a look at the highlights for the first quarter. Let me start by saying that Q1 is maybe the seasonally weakest quarter of the year, only comparable to Q3 when we have the summer vacation effect. This year, we also had full Easter effect in Q1, which is normally not the case.
But in addition to this, the macro environment for collection is the toughest that at least I have seen during my more than 15 years in the industry. And it's not just the macro, but it's the macro in combination with a more challenging legislation environment, exemplified by payment-free months to debtors and easier access to debt restructuring. With this as a backdrop, let me go through the most important highlights for the quarter. Gross revenue declined 4% year-over-year, and the main reasons for the negative development are still the very challenging macroeconomic situation, but also the relatively moderate investment levels Axactor had in 2023. I will come back with more details on this.
Cash EBITDA was down 5% year-over-year, but please note that this includes a EUR 1 million restructuring cost related to an already implemented organizational change, with a corresponding annual cost reduction of EUR 6.5 million in Germany. EBITDA was EUR 26 million, down from EUR 30 million last year, but still at a very healthy level of 46%, especially if you compare with the rest of the industry. If you adjust for the mentioned EUR 1 million in restructuring costs, the margin was 48%. The annualized return on equity is still in positive territory at 1%, but the truth is that Axactor, as most other players in the industry, is burdened with higher for longer interest rates and a challenging collection environment, putting pressure on profitability. As I mentioned in my introduction, I will now give some flavor to the industry challenges.
Please move to slide four. Now, let me start with some hard facts. In 2023, seven out of the 11 largest debt collection companies reported negative returns. Now, one aspect that makes this a bit extra challenging is that it is the largest players that are struggling the most. This creates challenges for the whole industry in many aspects, as investor confidence to the sector is under pressure, funding become less available, more expensive, et cetera. Even though the situation for the industry is difficult, I must say that I'm proud that Axactor has been delivering among top three in return on equity in both 2022 and 2023. But I guess the main question is: Why has the industry ended up in this unfortunate situation? The answer is, of course, complex, with many variables, but on the next page, I will give you overview.
We believe there are at least five main explanations behind. Some of them are relevant to Axactor, others not. The first three is almost generic and are relevant for most of the players. Both the underlying interest level and the risk spreads has gone up substantially over the last couple of years, with increased funding costs as a result. This puts pressure on industry profitability, as many companies, also Axactor, are depending on floating interest facilities. And for the companies with fixed rates, the facilities will eventually go to maturity and will need to be refinanced in the new interest environment. Another important factor is that the industry has been overpaying for NPL portfolios, especially in the period from 2016 - 2020.
In this period, when access to cheap funding made it possible to invest significant amounts into NPL portfolios, the NPL industry took over large part of the bank's NPL exposure. The challenge is that we did this at too low IRRs, with money multiples around 2x, far below the levels we saw from 2010 - 2015, when it was between 2.5 x and 3x. Another element is that the industry has not been willing to reduce overcapacity enough, but instead went for marginal pricing, not only on portfolios, but also when pricing large 3PC contracts. To add to this, we are in the middle of the toughest macro and collection headwind for probably more than a decade, with changes in the legislation environment amplifying to the challenges. The result is a very tangible delay in cash flows, especially from legal collections in the Nordics.
The last two elements, large M&A transactions and SPV structures, are not part of our strategy. These has too often proven to result in a substantial goodwill write-down and to drive costs. Axactor has, on the other hand, a very tangible asset side, with only 4% of our balance sheet being goodwill. So what will Axactor do to ensure our competitive position and hence profitability going forward? Please move to slide six, and I'll expand. The way we see it, there are mainly three elements that will substantially improve Axactor's profitability going forward. Two of them, we can influence a lot, which are accelerate accretive investments and continue to improve our cost position. The third one is basically out of our hands, but there is no doubt that a potential decline in interest rates would have a major positive impact on our profitability.
I will now deep dive into these three elements, starting on the next page with investments. Last year, Axactor had a moderate investment level of EUR 116 million, still above our replacement CapEx in 2023, but not contributing to meaningful growth. The low investment pace continued into first quarter.... The good news, however, is that it was done at very attractive prices, which resulted in improved total gross IRR on our back book. But looking at the graph on the left-hand side, I must say that I was a bit surprised when we put together this industry investment analysis and discovered that we were on the very bottom of the list. We thought that, given the financial challenges, the industry has been facing, that the capital discipline would have been a bit stronger.
This market is extremely price-driven, and 99% of all deals are given to the highest bidder. So it is not difficult to increase investment levels, but we insist that it must be done at reasonable terms. Another positive element is that we now see more volumes coming to the market, and we consider the current price level attractive, although with lower IRRs than what we signed at in 2023. We therefore aim to gradually ramp up our investment levels and still expect to invest between EUR 100 million and EUR 200 million for the year. Let's move to NPL cost to collect on the next page. We are, of course, very satisfied with the fact that we, over the last few years, have been able to increase the gap to peers on cost to collect.
If you look at the graph at the right-hand side, you can see that the gap towards most of the peers is now starting to become really meaningful, and we project that we will keep our outstanding cost position also in the years to come. However, it does not come without a lot of work and difficult decisions. On the next page, I have included a few examples of improvements that we have implemented over the last 12 months. I'm not going to go into details on a country level, but there has been a combination of site consolidation and capacity adjustments, both within operations and administrative functions. In addition, we have closed down unprofitable 3PC operations. Further, we have renegotiated 3PC contracts, and where renegotiations were not successful, terminated agreements.
These are all examples of tangible cost reduction initiatives, but we have also done other changes that has contributed positively. For example, we have merged the Norwegian and Swedish NPL organization under one management team, utilizing management capacity and knowledge across the two countries, and at the same time made sure that we have a separate management team fully focusing on building our 3PC bank and finance operations in Norway. In Italy, we are running an operational pilot to test NPL collection in our low-cost call center in Sicily, so far with promising results. And in Spain, we have been able to establish a high-quality operation within secured claims that both handle our own portfolios and delivers 3PC services to investment funds. So as you can see, we are still pushing to improve within cost to collect and will continue to do so.
Regarding potential declining interest rates, please move to the next slide. As I said initially, this is not an area we can really impact that much, except working with the capital structure in different ways. But it must be mentioned as a potential decline in interest rate will really move the needle in terms of profitability if the interest forward curves will come through over the next couple of years. And just as a reminder, a one percentage points reduction in the interest rates will improve Axactor's cash flow and net financial results by EUR 9.3 million on an annual basis, with a corresponding improvement in return on equity of 1.6 percentage points. That is the good news. The bad news is that it will take time, and the effects in 2024 will be limited.
As an example, without being too technical, due to the way the interests are calculated on our loan facilities, any interest reductions after first of October will not have any impact on the 2024 financials. Nina, with that, I leave the word to you.
Thank you, Johnny. Before I start going through the Q1 numbers, I just want to remind that as of 2024, Axactor does no longer have any discontinued operations. All prior figures presented are for continuing operations, unless otherwise stated. Turning to the numbers, gross revenue for the group ended 4% below Q1 2023. The decline in revenue was mainly a result of the challenging macro situation, the moderate investment level in 2023, and the impact of Easter falling in March this year. The NPL segment reported a negative growth of 4% this quarter. As previously mentioned, external market factors and moderate investment levels being the main reasons for the decline. The 3PC segment experienced a decline of 7% in Q1. Let's look a bit more into details on each of the business segments, starting with NPL on the next slide.
Total income for the NPL segment ended at EUR 45 million in Q1, down from EUR 49 million in the first quarter 2023, with a decline of 9%. Although the overall reported collection performance was below expectation for the quarter at 92%, Italy and Spain still maintained healthy collection levels. The NPL amortization rate fell from 28% to 26% due to increased average IRR on the portfolios and prolonged cash flow estimates. The cash flow estimates are pushed forward due to high share of collection from payment plans versus full settlements. Bailiffs in the Nordics and Germany are continuing to offer debtors more flexible terms due to higher living costs. This includes higher reservation amounts and payment-free months in several markets, putting pressure on the collection performance in the quarter.
On the more positive side, we see that continued strict cost control in all countries helps to secure a healthy margin. The contribution margin for a segment ended at 75%, the same level as previous quarter. Please turn to the next slide for comments on the development in the 3PC segment. The 3PC revenues ended at EUR 12 million for the quarter, 7% below Q1 2023. The main reason for the decline was the close down of the 3PC segment in Sweden and Finland in the fourth quarter last year. Whereas Italy, Norway, and Spain all recognized revenue growth in the quarter. The contribution margin was 32% in the first quarter, up from 31% in the first quarter last year. The increase in margin was driven by healthy cost control and the exit of low margin business in Sweden and Finland.
We expect to see an improvement in this business segment in the second half of this year, supported by newly signed contracts. Let us move on to the next slide, where I'll present more details on the reported financials. Total income at group level ended at EUR 57 million in Q1, down from EUR 62 million in Q1 2023. The reported EBITDA came in at EUR 26 million, down from EUR 30 million in Q1 last year. The reduction from last year was driven by the fall in total income and approval of restructuring cost of EUR 1 million. The restructuring cost is related to a cost efficiency and site consolidation program in Germany. The EBITDA margin ended up at a healthy 46% or 48%, excluding their restructuring cost, and continues to be supported by good cost control in all countries.
Cash EBITDA ended at EUR 49 million for the quarter, equal to the decline of 5% from Q1 2023. Moving on from reported cash EBITDA to some comments on the return on equity development on the next slide. At the end of Q1, we have maintained an ROE level of 6% on a 12-month rolling basis, despite the external headwinds related to the macro environment and increased cost of funding. So in summary, we experienced a soft first quarter of the year collection wise, but despite the challenging environment, we have managed to maintain a healthy financial position. This has been achieved through strict cost control and increased gross RRRs on acquired portfolios, which continue to be our key improvement drivers going forward. I'll now hand it back to Johnny for some comments on the outlook.
Thank you so much, Nina. Regarding outlook, a lot has been said already, but to summarize, we expect to experience a challenging collection environment during the whole of 2024. Further, we have very good cost control and expect to be able to absorb any cost inflation through OPEX reductions. As mentioned earlier, we expect only a modest reduction in cost of funding due to potential, interest rate decline in 2024, and we keep our investment target of EUR 100 million-EUR 200 million for the year. Finally, as of Q1, we are compliant with all covenants, but given the limited headroom on leverage ratio and interest coverage ratio, we will pay close attention to these going forward. A continued low collection performance could potentially lead to a need for covenant waivers, but any accretive portfolio investments will ease the pressure.
With that, we open up for Q&As.
Thank you. If you'd like to ask a question, please press star, followed by one on your telephone keypad. If you change your mind, please press star, followed by two. When preparing to ask your question, please ensure your device is muted locally. We will make a quick pause here for the questions to be registered. Our first question comes from Rickard Hellman from Nordea. Your line is now open.
Thank you, and hi, everyone. First question regards to the covenants that you are, you know, more or less on at the threshold in terms of leverage and approaching the threshold in terms of ICR. Can you say—I mean, also looking what you will face in Q2 with the Q2 2023 number, cash EBITDA pretty strong. I deem it, you know, it is a fairly high risk that you will be in breach of the covenants. Can you give some, you know, update how you will avoid this? And, I mean, what is your plan around this?
Yes. Well, I think we were pretty clear in the material that there, of course, is a risk. Also, what can be done to avoid it is, of course, to do whatever we can to keep collection performance as high as possible. It is to be very strict on cost control. But what could also really move the needle is if we are able to do accretive investments. And investments could be accretive on both leverage ratio and on the interest coverage ratio. So that is, that is the toolbox, I would say.
Mm-hmm. But I mean, investments, will they even be able to to impact the Q2 numbers in a positive way?
Yes.
Just to time, time-wise?
... Yes, because if you remember how the, if you look at how the covenants are calculated, you will see that, we have a pro forma cash adjustments for the first 12 months of the curve. So it-
Yeah
- actually helped quite.
I see. But then moving on to collection, also one thing that you mentioned as a tool, of course, but you do believe that it will be challenging, I mean, you guide for challenging. I mean, are we talking similar to what we saw in Q1, or have you felt any improvements during the quarter?
Well, I think, again, we write here that we believe that it will be challenging throughout the full year. We don't comment on April specifically because the month is not even closed yet in terms of financials. Normally, Q2 is a better collection quarter than Q1 for several reasons. Among it, tax refund, it's summer vacation payments. It's different things that makes Q2 normally a better quarter. But as you also point out, we are removing a strong Q2 from 2023. So I think I don't think I could elaborate much more than what's already said in the material. We are balancing a thin line, but we're doing whatever we can. And the situation is, as it is, it's difficult for us.
We experienced that, like I also said, that the legal collection environment has changed quite dramatically over the last year, which gives us, given our pretty mature book, especially in the Nordics, more challenges than if we had had also more fresher claims in the book, I think.
Okay. And if you would be in breach, you would, of course, seek waiver. How do you feel, I mean, given the situation in the bond market as it looks now with Intrum, you know, with the situation there? I guess it would also be more challenging for you to receive consent from bondholders, or what is your view on that?
Well, yes, maybe you are a better expert than me on how this will be received in the market. I don't think that it's fair to compare us with Intrum. That's a very special situation, very special case, which I will not comment on any further. But if you look at our own balance sheet, it's very tangible. We have 4% of our balance sheet is goodwill. I mean, book values are solid. We could, I mean, I think that investors will look at this completely differently than the company you compare with. Also, we did this, I think, especially the interest coverage ratio, it's more a mechanical thing for me.
We did also do a covenant adjustment or a waiver last year because the interest rates have gone up so quickly that it's more or less impossible to make the same improvement in the underlying business result. Regarding leverage ratio, again, it is what it is. We have seen a significant delay in cash flows, and we just have to take the consequences of it. I expect that a bit what we saw in the last round, that the investors were very constructive and did fully understand why things are as they are, and also came back being constructive regarding price and so on. But I think it's a little bit premature. Let's see if we're going to need a waiver or not.
But, yeah, I think I'll leave it at that for now.
Yeah. Thank you. It was not a comparison with Intrum, more of, you know, in the market might be negative biases for the sector in that sense, with Intrum being there.
Yeah.
Final question around collections. I mean, clearly, disappointing and weak in the Q1, but you mentioned it's satisfying in south of Europe. I mean, are we talking around 100%, which then would imply, you know, a very poor collections in the Nordics and Germany?
Right. So, we are at 100%, and then it's also a secured. Secured is actually performing even better than 100%. So yes, you are correct. It's very poor in the Nordics and in Germany, and strong in Spain and Italy, for both secured and unsecured in Spain. And to elaborate why it is like that, I think I've mentioned it before, this has very much to do with the way collection is performed on legal collection. Because while in the Nordics we have this very strong bailiff system, we don't have that in Spain and Italy. There, we use the legal system as such. And what has happened over the last couple of years is that the bailiff has changed quite dramatically the way they operate.
So from being kind of the big advantage in collection, being in the Nordics, where you have a really strong and relatively cheap to use bailiff system, it now has become a more challenging situation because a few things that has happened is that they have changed the reservation amount in connection with the salary deductions, much more than inflation. And that leaves much less headroom for debtors to repay debt using salary deduction. Secondly, they have made it much easier to get approved a debt restructuring program, which is, of course, negative for us, compared to the situation before. And thirdly, in some countries, they have implemented payment -free months. And in, for example, in Finland, it is now possible to get up to four payment-free months a year.
And that of course gives us a significant delay in cash flow. So the debtors will most likely repay, but over a longer time, accruing interest, so the NPV value is not that different, but short-term cash flow is much less. And this is why you see the big difference, I think, between the Nordics and the southern part of Europe.
Mmm. Yeah, I see. Very helpful. I appreciate the color here. And hence also, of course, I understand why you don't see, you know, a quick shift in the Nordics either.
Mm.
Thank you very much. I leave it there.
Thank you.
Our next question comes from Håkon Astrup from DNB Markets. Your line is now open.
Good morning. Thanks for taking the question, and thanks for the presentation. So most of my questions have been asked, but just following up on the collection performance in the quarter. So looking at 92% now, I think last, last time it was as bad was in Q3 2021, and following that you had the meaningful negative revaluations. I was just wondering, what you see the risk of something similar happening now, given that also your outlook of continued challenging collection environment going forward?
Yes. So, you're right, that was Q3 2021, where we had 89% collection performance, so even worse than this quarter. But I think the main difference between the two quarters was that in 2021, we didn't actually understand why the collection performance was so low, because there hadn't been any changes in the legislation environment, for example. We hadn't seen that large payments, like we have been relying a lot on here in Norway, for example, they were not gone. So, we didn't understand exactly why the collection performance was so poor.
This time, we know perfectly why it's so poor, and, like I just explained, this time, it's much easier to defend balance sheet values, because we know why the collection from the legal cash flow in Sweden, Norway, and Finland are much lower. We can document it, and we know that it will be over. We will recollect debt over time instead with added interest. Yes, some debtors will not be able to repay in full. But the NPV value, it's much easier to defend at this point in time than it was back in 2021, and that's also why we did this major write off.
I see. So even though if you continue to deliver collections performance in the low nineties, that does not, say, automatically lead to a negative revaluation?
Not, not automatically. But if you look at this quarter, out of the EUR 10 million, call it, the loss is EUR 5 million, is related to the collection performance as such. So it's not an automatic link between poor collection performance and a revaluation.
Understand. Just following up on that, do you see any differences in terms of vintages on your investments, where the collection performance is particularly challenging, or is it more or less similar across all your vintages in the Nordics and Germany?
No, oh, it's, it's, it's a big, big difference because more or less, I'm not going to say all challenges, but most of the challenges are related to vintages from 2016 - 2020. And also 2020, because you remember back in 2019 and 2020, we were relying heavily on forward flow contracts. And what we acquired in 2020 was, in most cases, signed in either 2018 or 2019 at that current price level. So those five first vintages are... First of all, they are done at the money multiple, around 2, compared to the vintages 2021-2024, or what's up to today, which is done about 2.4. So it's a big difference in kind of the gross IRRs and the net IRRs, but also quality.
So it's a major shift. The issue is, if you... And I'm sure you have this data, but if you compound it, you will see that we invested close to EUR 1.4 billion in the mentioned period, 2016 to including 2020. And it's still a major part of our back book, unfortunately. We are doing what we can on blending the book or buying accretive portfolios, but this takes time. You can just imagine, I mean, now we have a back book now at EUR 1.2 billion, and we are guiding at EUR 100 million-EUR 200 million in new investment. So it takes several years to really have a meaningful blending of the book, unfortunately. But that's the situation.
Makes sense. Thank you very much.
Thank you.
...As a reminder, to ask a question, please press star followed by one on your telephone keypad. Our next question comes from Gustav Larsson from Arctic Securities. Your line is now open.
Good morning, and thank you for taking my question. I have another follow-up here on, on collections. Collection performance down to 92% from 99% in Q4, it seems like a big drop, and you still have the same comment about weak in Nordics, Germany, and, and Southern Europe, which you have discussed already, in addition to Easter. But can you give some more details on the delta here? What has changed from, from Q4?
Well, first of all, Q4 is normally maybe the, even the strongest collection quarter of the year, normally. Together with Q2, but it's normally a very strong collection quarter. And Q1 is the weakest. And it has—and this year, I think, the disposable income situation is just getting poorer and poorer for debtors. Exactly, I'm not gonna break down the delta from 99% to 92%, but it's also a fact that while we in Q4 last year, we did curve curve adjustments, which will help us on the collection performance, which we have. You know, at some point in time, when you are moving curves, because this is the way you do.
You, when you work with active forecast, you go through over and underperforming portfolios, and you make curve adjustments. But at some point in time, when you have made curve adjustments, like we have done over the last two years, at some point in time, you have to realize, will this money, is it just a cash delay, or will it actually not be collectible? And here we have taken the amortization up in this quarter compared to previous quarter. So it's kind of a little shift that we have been delaying cash flows for a while, like the rest of the industry.
We think it's now prudent to say that, okay, some of this cash flow will not come through, at least not as early as we thought, originally, and that's why we are taking up the amortization, and taking down the collection performance.
Thank you. A quick one on 3PC then. You expect growth in the second half of this year. Do you see this market improving, or is it just the single contracts or effects from the measures you have taken?
So we see, if I take the market improvements and split it in two elements, so we see that prices are improving. I'm not—I can only speak for ourselves there. We are achieving better margins on the contracts that we are choosing to continue with, or new signings. So definitely something on the pricing side. When it comes to the volume, it is a growth, but it's surprisingly low. It's still not this, not a massive increase in defaults, I would say. But it's growing steadily, and we expect that to continue.
Okay, thank you. A question on the investment level here. You're guiding for EUR 100 million-EUR 200 million. But is it possible for you to deploy EUR 200 million at 35% IRR, or, or will this figure need to come down significantly if you're gonna spend that amount of money?
Yeah. So this, I think, if you look back on the previous quarterly presentations, we have always been open and honest, saying that 35% is not a sustainable level if you want to sign a lot of volume. We did sign EUR 40 million-EUR 50 million new deals at that level last year. If we were to invest the same level, so EUR 50 million this year, I think we could come something in the same area, maybe not 35%, but between 30% and 35%. But this is just... If we want to take up the investment levels, as we will do, we have also said that we think that we need to go down, and I would expect for us to be able to invest EUR 100 million-EUR 200 million , we will have to lower the prices somewhere between 25% and 30%.
But, but in, even at 25%, we are more than covering the increased funding cost and, increased risk in, in curves. So it's, it's still really good vintages if we can buy it at, at, 25%. And I think just to, to give you a comparison, one of our main, peers that invested, close to EUR 700 million, I think it was last year, they did it at- they, they said this is their own information. They said that they did it at 21% gross IRR. So if, if, if you really want to invest EUR 500 million or EUR 600 million or EUR 700 million , you really need to go down on gross IRRs. So I think this is just-- and, and, and it's pretty, it's pretty logical. You, you need to go down in order to win the, win the contract.
Like I say, this is very price efficient market. I think for us to be able to invest EUR 100+ million, we could do it still at really healthy margins. Yeah. I don't know if that's enough flavor on it.
Yes. Thank you very, thank you very much. That's perfect. I have one last question. Thank you very much for, for answering them all. Cost control remains good here, and, and you have done a lot to show on, on page nine here in the presentation. If you look at the number of FTEs, it's only down 2.5% year-over-year. How should we think about operating expenses going forward? Will the cost savings in Germany be visible from Q2? And so that's the first question. And then second, if you can just elaborate a little bit on how much more efficiency gains can you actually do, given that you have done so much already?
Yeah. So, the German project, like we say, has already been implemented. And, by now, approximately half of the effect has been rolled in, and then, you know, so half of the remaining effect is still to be implemented over the next 12 months, I would say, in Germany. So, still some way to go there. You are right, we have done a lot, but there are still things to do. I wouldn't link it too much to number of FTEs, because, first of all, we are taking down the number of FTEs in the Nordics quite substantially because we become more and more automatic on collection, and we are increasing FTEs in low-cost areas, like in Italy.
We have a local center at Sicily, for example, that you really will see that number of FTEs are increasing. So don't pay too much attention to that. Also, we are moving from high-cost salaries to low-cost salaries in some areas, so it's. Don't pay too much attention to the FTE number as such. When it comes to how you should look at this going forward, I think what we have said, and I think this we are pretty confident, that we will be able to absorb any cost inflation through continued cost reduction. So the main elements left, and you're right, there are not that many hard, you know, really the tangible ones, if you look in terms of FTE reductions.
But we did now, as I said, we still have half the effect from the Germany project. We have some other FI projects as well, but it's not so many FTEs that will be reduced. But we also have some other elements. We are looking into becoming more efficient on collection. You know, in addition to FTE cost, legal cost is a major cost element for us, and here it's all about selecting the right claims to go legal on. And I think here, maybe we have gone legal on too many claims, so we don't. I think we have something to go on when optimizing the legal cost, on a claim-to-claim basis.
We have something to do on premises and smaller things like that, but of course, we are also focusing a lot on doing collection more efficiently, using more automation and scorecards and so on. But I don't think that you can expect a dramatic reduction in FTEs over the next two to three years due to this.
Okay, thank you very much. That's all from me.
Thank you so much.
That was our final audio question, so I will hand back over to Johnny Tsolis .
Thank you very much. Then we have a few questions online here, and some of them we have already answered, so I will, but I will double-check. So we have one there asking us if we could elaborate on how the collection environment is more tricky in Germany and the Nordics? I have covered the Nordics. But regarding Germany, I would just say that here they also probably the only country in our markets that is in recession, and that's been, it's been for a while. And you see that they also have significant inflation, so disposable income is substantially lower for the German debtor, and that is why it has been more challenging in Germany, I think, the last year or so.
Then we have a question. In Q1, your collection performance was 92%, and you had EUR 9.9 million in credit loss. Let's assume that the current difficult collection environment continues and the collection performance stays at 92%, should we then expect around EUR 10 million in credit loss per quarter going forward? I think I also already answered that earlier. No, there's no direct link, because it's only part of the net credit loss that is due to a low collection performance. Then we have: Could you comment on the forward flow agreement write-downs undertaken in the quarter? And I will leave that for you, Nina.
Yes, I can answer that. We have a quite small, I would say very small impact in the change of fair value of forward flow commitments this quarter, as shown also in the note nine to the interim report. The total amount was EUR 120,000, and it's related to that we received some smaller volumes on the forward flow agreement than expected. And I can also add that at the end of Q1, the fair value is zero at the end of the quarter.
Thank you, Nina. Next question: What measures will you take to avoid breach of covenants? Also been through it, but quickly remind, so it's strict cost control, it's, do whatever we can to keep collection at the highest possible level and to do accretive investments. And next one, Q2 2023 comparable is very strong. Could you comment on the covenant breach risk over the next quarter? Already done. What about equity rates to support this investment at EUR 100 million-EUR 200 million? It's not necessary. We don't have an equity problem. We have more than EUR 400 million in equity. We have no maturities the next more than, yeah, two, two and a half years. We have what we need of of investment capacity, so equity raise is not a question for us.
And the next one, if you are so close to your debt covenant, why investing EUR 100-200 million? Should you not use this cash to reduce leverage? So then again, this is a misunderstanding. There's, there's no link between investing and covenant breaches. If you in the- or let me elaborate. Depends on what kind of portfolios you buy. If you buy portfolios with early cash flow, which we normally focus on, you will, you will buy portfolios that is accretive on both leverage ratio and interest coverage ratio. So investing EUR 200 million in accretive portfolios could actually be the one most important thing to do in order to avoid covenant. So, hope that clarifies any misunderstandings between the leverage ratio, and and investments.
It looks like that was the last question that we have received. So, thank you so much for attending this call, and we wish all of you a great day. Thank you.
This concludes today's call. Thank you for joining . You may now disconnect your lines.