Interim report April - June 2014 - intrum.com · Interim report April - June 2014 July 17th 2014 Lars Wollung, CEO ... Excl. PD Revaluations 2014 2013 % % Revenues, SEKm 1226 1223

Interim report

April - June 2014

July 17th 2014

Lars Wollung, CEO

Erik Forsberg, CFO

© Intrum Justitia AB 2014. All rights reserved.

Quarterly highlights

2(25)

MSEK investments in purchased debt 537

EBIT growth (adjusted for currency and debt

portfolio revaluations) 14%

Return on purchased debt 21%

Growth in operating cash flow 8%

RTM EPS growth 28%


Financial summary

3(25)

* EBITDA = operating result before interest, taxes, depreciation on tangible and

intangible fixed assets as well as amortization and revaluation of purchased debt

Apr-Jun Apr-Jun Change

%

Jan-Jun Jan-Jun Change

% 2014 2013 2014 2013

Revenues, MSEK: 1 301 1 152 13 2 505 2 200 14

EBIT, MSEK: 372 301 24 655 537 22

EBIT margin, %: 29 26 n/a 26 24 n/a

EPS growth, %: 26 45 n/a 24 54 n/a

Cash flow from operations, MSEK: 570 530 8 1 100 994 11

Investments in purchased debt, MSEK: 537 597 -10 1 225 1 517 -19

Return on purchased debt, % 21 22 n/a 20 21 n/a

Net debt to RTM EBITDA*: 1.90 1.76 1.90 1.76


Revenues and operating margin, rolling 12 months

4(25)

10

15

20

25

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

5 000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Revenues

EBIT

EBIT margin

%

Revenues: SEK 4 871 M

Operating margin: 27%

EBIT and margin excludes UK costs for goodwill write down in 2008 and downsizing

costs in 2009, as well as non-recurring costs in Spain and Germany in 2012.

SEK M

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014


Regional development

Northern Europe 50 percent of total revenues

Market leader

Top 5

Market position

Revenues and earnings for the quarter exclude a net revaluation of purchased

portfolios of SEK 12 M in Q2 2014 (-3 in Q2 2013).

• Growth in EBIT excluding revaluations due to improved CMS growth and cost efficiency improvements

• Issues related to the Polish legal system improving during the second quarter

• Previously separate unit for financing of receivables before or at due date integrated mainly into the Northern Europe organization

Q2 Highlights

5(25)

Apr-Jun Apr-Jun Change Fx Adj

Excl. PD Revaluations 2014 2013 % %

Revenues, SEKm 636 642 -1% -4%

EBIT, SEKm 200 189 6% 3%

EBIT margin % 31% 29% 2 ppt

Jan-Jun Jan-Jun Change Fx Adj


Revenues, SEKm 1226 1223 0% -2%

EBIT, SEKm 344 330 4% 2%



Market position

• Growth in PD investments during prior periods drives improved EBIT growth

• Continued year-on-year increase in costs for legal collections

• Integration of major PD unit acquired in Q1-14 in Czech Republic progressing according to plan

Market leader

Top 5

Other


portfolios of SEK 8 M in Q2 2014 (7 in Q2 2013).

Q2 Highlights

6(25)



Revenues, SEKm 337 248 36% 30%

EBIT, SEKm 87 56 55% 49%





EBIT, SEKm 182 124 47% 41%



Central Europe 26 percent of total revenues



Western Europe 24 percent of total revenues

Market position

Market leader

Top 5

Other

• Good year-on-year EBIT development, mainly from improved CMS earnings

• French acquisition from 2013 progressing according to plan and contributing to year-on-year revenue and EBIT growth

• Good increase in PD investments for several markets in the region

Q2 Highlights


portfolios of SEK 3 M in Q2 2014 (2 in Q2 2013).

7(25)




EBIT, SEKm 62 50 24% 17%





EBIT, SEKm 116 81 43% 36%



Credit Management Services 64 percent of total revenues

Q2 Highlights

• Revenue growth mainly from acquired units and increased volumes from servicing of own PD portfolios

• Service line margins improving during the quarter with YTD margins now approximately in line with last year

• Continued focus on improving collection performance and growing revenues from external clients

8(25)


Reported numbers 2014 2013 % %


Service line earnings, SEKm 235 207 14% 10%

Service line earnings margin % 25% 24% 1 ppt



Revenues, SEKm 1865 1685 11% 7%


Service line earnings margin % 22% 23% -1 ppt


Financial Services 36 percent of total revenues

Revaluations amounted to SEK 23 M in Q2 2014 (SEK 6 M in Q2 2013) .

• Revenue and earnings growth due to uptake in PD investments in recent years

• Good collection performance and positive revaluations confirm underlying strength of the PD Book

• PD investments during the 1H of 2014 down 19% YoY, but compared to a very strong 1H of 2013

Q2 Highlights

9(25)






Investments in PD, SEKm 537 597 -10%

ROI 21% 22% -1 ppt



Revenues, SEKm 1039 846 23% 19%



Investments in PD, SEKm 1 225 1 517 -19%

ROI 20% 21% -1 ppt


PD ROI – rolling 12 months

10(25)

0%

5%

10%

15%

20%

0400800

1 2001 6002 0002 4002 8003 2003 6004 0004 4004 8005 2005 6006 000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

SEK M

PD carrying value:

SEK 6 030 M

ROI RTM, excl. reval: 20%

PD carrying value ROI RTM

2008 2009 2010 2011

ROI RTM excl. reval

2012 2013 2014


258 201 267

822 870 996 872 871 1050

1804

295

920 688

667

597

537 299

692

753

266

0

500

1 000

1 500

2 000

2 500

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

266

Purchased debt, investments 2002–2014

11(25)

SEK M

2 014

Q1

Q2

Q3

Q4

FY

2 475

1 225


Purchased debt - revaluations

12(25)

Q2 YTD Q2 YTD

PD revaluations, SEK m 2014 2014 2013 2013

Northern Europe 12 0 -3 -6

Central Europe 8 10 7 5

Western Europe 3 3 2 3

Total 23 13 6 2


Balance sheet – Highlights

13(25) * EBITDA = operating result before interest, taxes, depreciation on

material and immaterial assets as well as amortization and revaluation

of purchased debt

30 Jun 30 Jun Dev

SEK m 2014 2013 %

Total assets 10 969 9 605 14

Goodwill 2 608 2 420 8

Total financial fixed assets 6 122 5 044 21

- whereof purchased debt 6 030 4 970 21

Shareholders' equity 2 982 2 945 1

Net debt/ R12 EBITDA* 1.90 1.76


Cash flow statement

14(25)

Apr-Jun Apr-Jun Dev Jan-Jun Jan-Jun Dev

SEK m 2014 2013 % 2014 2013 %

Operating earnings (EBIT) 372 301 24 655 537 22

Depreciation 40 40 0 78 79 -1

Amortization and revaluation of purchased debt 337 321 5 697 639 9

Income tax paid -56 -28 100 -101 -65 55

Changes in factoring receivables -24 -83 n/a -25 -91 n/a

Other changes in working capital -63 11 -673 -104 -29 259

Financial net & other non-cash items -36 -32 13 -100 -76 32

Cash flow from operating activities 570 530 8 1 100 994 11

Purchases of tangible and intangible fixed assets

(CAPEX) -32 -31 3 -60 -59 2

Purchases of debt -537 -597 -10 -1225 -1517 -19

Other -7 -18 n/a 17 -22 n/a

Cash flow from investing activities -576 -646 -11 -1 268 -1 598 -21


Funding base

• Syndicated bank loan facility (up to SEK 5bn)

‒ About SEK 2 bn utilized per June 2014

‒ Loan facility allows a total financing of up to SEK 10 bn

• Corporate bonds (up to SEK 5 bn under MTN program)

‒ SEK 1 bn, 5Y note, issued in March 2012 (margin of 3,10%)

‒ SEK 1 bn, 5Y note, issued in June 2013 (margin of 2,22%)

‒ SEK 1 bn, 5Y note, issued in May 2014 (margin of 1,60%)

• Commercial Paper (up to SEK 1,5bn)

‒ SEK 0,6 bn outstanding per June 2014

• Co-Investors – for large portfolios of receivables

‒ Past investors have included e.g. Goldman Sachs

‒ Typically participate by 50-75% of total investment

15(25)

0

500

1000

1500

2000

2500

3000

3500

2014 2015 2016 2017 2018 2019

Debt Maturity Schedule (SEK million)

Commercial Paper Bank Loan Bonds


Financial targets

16(25)

Financial targets Q2 14 Q2 14 RTM FY 2013

1. EPS growth to exceed 10% per year 26% 28% 41%

2. Return on PD investments to exceed 15% per year 21% 20% 21%

3. Net Debt/EBITDA should be between 2.0 and 3.0 1.90 1.90 1.61


17(25)

Q&A


18(25)

Appendix


Market leader

One of top five

Intrum Justitia's market position

Intrum Justitia in brief

19(25)

Europe’s leading provider of credit

management services, with

operations in 20 countries

Revenue 2013: SEK 4.6 billion

Avrg nr of employees in Q2 2014: 3 815

Listed on NASDAQ OMX, Stockholm,

Large-Cap

Market capitalization, June 30, 2014: SEK

15.3 billion

Other


Indicative Financial illustration

20(25)

Invested amount: 100 SEK M

Gross collection 2.05 x invested amount

(SEK M) Y1 Y2 Y3 Y4 Y5 Y6-Y10 Y11-Y15 Y1-Y15

Cash-flow distribution 29% 18% 12% 9% 8% 20% 4% 100%

Gross collection 60 38 25 19 15 40 8 205

Amortisation * -31 -17 -11 -9 -7 -20 -5 -100

Amortisation rate (Amortisation/Gross Collection) 52% 44% 45% 46% 48% 50% 59% 49%

Revenues (Gross Collection less Amortisation) 28 21 14 10 8 20 3 105

Costs ** (mainly Collection Costs) -14 -11 -6 -4 -3 -9 -2 -48

Service Line Profit 15 10 8 6 5 11 2 57

Service Line Margin 52% 49% 57% 59% 60% 57% 52% 54%

Book Value, Average Balance 84 60 47 37 29 15 2

RoI, defined as Service Line Profit/ (Average Book Value) 18% 17% 17% 17% 17% 77% 75%

*) The PD amortization equals the change in carrying value in each year. The change in carrying value in turn is a function of the change of the estimated present value of

future collections of the portfolio, estimated as the cash-flow from Gross Collections less Collection Costs, discounted at an estimated Effective Interest Rate (IRR)

**) Collection Costs are mainly commission charged from Intrum's CMS service line at arms-length prices


0 250 500 750

1 0001 2501 5001 7502 0002 2502 5002 7503 0003 2503 5003 7504 0004 2504 5004 7505 0005 2505 5005 7506 0006 250

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Purchased debt, carrying value

21(25)

SEK M


Gross Collections vs. Active Forecast - R12

22(25)

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214


One-offs vs Forward Flow, as a % of PD Investments

23(25)


A broad indication going forward

Carrying value 30 Jun 2014: SEK 6,030 M

+21% y-o-y (SEK 4,970 M)

24(25)

Gross collection: Carrying value x 2.1

Cash flow distribution 30 Jun

of Gross collection 2014 2013

Y1 22% 23%

Y2 17% 17%

Y3 13% 14%

Y4 11% 11%

Y5 9% 9%

Y6 7% 7%

Y7 6% 6%

Y8 5% 4%

Y9 4% 3%

Documents

Interim report April - June 2014 - intrum.com · Interim report April - June 2014 July 17th 2014 Lars Wollung, CEO ... Excl. PD Revaluations 2014 2013 % % Revenues, SEKm 1226 1223