Interim report April - June 2014

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Quentin Samson Fowler
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1 Interim report April - June 2014 July 17 th 2014 Lars Wollung, CEO Erik Forsberg, CFO

2 Quarterly highlights 28% 14% 8% 21% 537 RTM EPS growth EBIT growth (adjusted for currency and debt portfolio revaluations) Growth in operating cash flow Return on purchased debt MSEK investments in purchased debt 2(25)

3 Financial summary Apr-Jun Apr-Jun Change Jan-Jun Jan-Jun Change % % Revenues, MSEK: EBIT, MSEK: EBIT margin, %: n/a n/a EPS growth, %: n/a n/a Cash flow from operations, MSEK: Investments in purchased debt, MSEK: Return on purchased debt, % n/a n/a Net debt to RTM EBITDA*: (25) * EBITDA = operating result before interest, taxes, depreciation on tangible and intangible fixed assets as well as amortization and revaluation of purchased debt

Revenues and operating margin, rolling 12 months SEK M 5 000 4 500 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 0 Revenues EBIT EBIT margin Revenues: SEK 4 871 M Operating margin: 27% Q1 Q2 Q3 Q4 Q1

4 Revenues and operating margin, rolling 12 months SEK M Revenues EBIT EBIT margin Revenues: SEK M Operating margin: 27% 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 Q % (25) 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.

5 Regional development Northern Europe 50 percent of total revenues Market position Market leader Top 5 Q2 Highlights 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 Apr-Jun Apr-Jun Change Fx Adj Excl. PD Revaluations % % Revenues, SEKm % -4% EBIT, SEKm % 3% EBIT margin % 31% 29% 2 ppt Jan-Jun Jan-Jun Change Fx Adj Excl. PD Revaluations % % Revenues, SEKm % -2% EBIT, SEKm % 2% EBIT margin % 28% 27% 1 ppt Revenues and earnings for the quarter exclude a net revaluation of purchased portfolios of SEK 12 M in Q (-3 in Q2 2013). 5(25)

6 Regional development Central Europe 26 percent of total revenues Market position Market leader Top 5 Other Q2 Highlights 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 Apr-Jun Apr-Jun Change Fx Adj Excl. PD Revaluations % % Revenues, SEKm % 30% EBIT, SEKm % 49% EBIT margin % 26% 23% 3 ppt Jan-Jun Jan-Jun Change Fx Adj Excl. PD Revaluations % % Revenues, SEKm % 30% EBIT, SEKm % 41% EBIT margin % 27% 25% 2 ppt Revenues and earnings for the quarter exclude a net revaluation of purchased portfolios of SEK 8 M in Q (7 in Q2 2013). 6(25)

7 Regional development Western Europe 24 percent of total revenues Market position Market leader Top 5 Other Q2 Highlights 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 Apr-Jun Apr-Jun Change Fx Adj Excl. PD Revaluations % % Revenues, SEKm % 13% EBIT, SEKm % 17% EBIT margin % 20% 20% 0 ppt Jan-Jun Jan-Jun Change Fx Adj Excl. PD Revaluations % % Revenues, SEKm % 19% EBIT, SEKm % 36% EBIT margin % 20% 17% 3 ppt Revenues and earnings for the quarter exclude a net revaluation of purchased portfolios of SEK 3 M in Q (2 in Q2 2013). 7(25)

8 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 Apr-Jun Apr-Jun Change Fx Adj Reported numbers % % Revenues, SEKm % 6% Service line earnings, SEKm % 10% Service line earnings margin % 25% 24% 1 ppt Jan-Jun Jan-Jun Change Fx Adj Reported numbers % % Revenues, SEKm % 7% Service line earnings, SEKm % 3% Service line earnings margin % 22% 23% -1 ppt 8(25)

9 Financial Services 36 percent of total revenues Q2 Highlights 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 Apr-Jun Apr-Jun Change Fx Adj Reported numbers % % Revenues, SEKm % 16% Service line earnings, SEKm % 18% Service line earnings margin % 56% 55% 1 ppt Investments in PD, SEKm % ROI 21% 22% -1 ppt Jan-Jun Jan-Jun Change Fx Adj Reported numbers % % Revenues, SEKm % 19% Service line earnings, SEKm % 21% Service line earnings margin % 55% 54% 1 ppt Investments in PD, SEKm % ROI 20% 21% -1 ppt Revaluations amounted to SEK 23 M in Q (SEK 6 M in Q2 2013). 9(25)

10 PD ROI rolling 12 months SEK M PD carrying value: SEK M ROI RTM, excl. reval: 20% PD carrying value ROI RTM ROI RTM excl. reval 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 20% 15% 10% 5% 0% (25)

11 Purchased debt, investments SEK M FY Q1 Q2 Q3 Q4 11(25)

12 Purchased debt - revaluations Q2 YTD Q2 YTD PD revaluations, SEK m Northern Europe Central Europe Western Europe Total (25)

13 Balance sheet Highlights 30 Jun 30 Jun Dev SEK m % Total assets Goodwill Total financial fixed assets whereof purchased debt Shareholders' equity Net debt/ R12 EBITDA* (25) * EBITDA = operating result before interest, taxes, depreciation on material and immaterial assets as well as amortization and revaluation of purchased debt

14 Cash flow statement Apr-Jun Apr-Jun Dev Jan-Jun Jan-Jun Dev SEK m % % Operating earnings (EBIT) Depreciation Amortization and revaluation of purchased debt Income tax paid Changes in factoring receivables n/a n/a Other changes in working capital Financial net & other non-cash items Cash flow from operating activities Purchases of tangible and intangible fixed assets (CAPEX) Purchases of debt Other n/a n/a Cash flow from investing activities (25)

15 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 Debt Maturity Schedule (SEK million) Commercial Paper Bank Loan Bonds 15(25)

16 Financial targets Financial targets Q2 14 Q2 14 RTM FY 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 (25)

17 Q&A 17(25)

18 Appendix 18(25)

19 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: Listed on NASDAQ OMX, Stockholm, Large-Cap Market capitalization, June 30, 2014: SEK 15.3 billion Intrum Justitia's market position Market leader One of top five Other

20 Indicative Financial illustration 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 Amortisation * Amortisation rate (Amortisation/Gross Collection) 52% 44% 45% 46% 48% 50% 59% 49% Revenues (Gross Collection less Amortisation) Costs ** (mainly Collection Costs) Service Line Profit Service Line Margin 52% 49% 57% 59% 60% 57% 52% 54% Book Value, Average Balance 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 20(25)

21 Purchased debt, carrying value SEK M (25)

22 Gross Collections vs. Active Forecast - R12 14% 12% 10% 8% 6% 4% 2% 0% Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214-2% -4% 22(25)

23 One-offs vs Forward Flow, as a % of PD Investments 23(25)

24 A broad indication going forward Carrying value 30 Jun 2014: SEK 6,030 M +21% y-o-y (SEK 4,970 M) Gross collection: Carrying value x 2.1 Cash flow distribution 30 Jun of Gross collection 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% 24(25)

Interim report January - March 2015

Interim report January - March 2015 April 22 th 2015 Lars Wollung, CEO Erik Forsberg, CFO Q1 Key highlights Strong financial performance EBIT excluding revaluations and fx-impact +12% Investment grade