Interim report January June 2015

Transcription

1 Interim report January June Second quarter Gross cash collections SEK 834m EBIT margin 30% Acquisition of loan portfolios SEK 665m CET1 ratio 12.58% April June, year-on-year Gross cash collections increased 36 per cent to SEK 834m (615) Total revenue increased 34 per cent to SEK 537m (401) EBIT totalled SEK 161m (132) The EBIT margin was 30 per cent (33) Profit before tax totalled SEK 52m (56) Portfolio acquisitions totalled SEK 665m (897) Basic earnings per share totalled SEK 0.53 (0.79) Diluted earnings per share totalled SEK 0.51 (0.66) 1) Financial net amounted to an expense of SEK 109m (expense: 76) and was charged with an expense of SEK 4m (expense: 7) related to currency and interest hedges 30 June, year-on-year The carrying value of acquired loans 2) increased 22 per cent to SEK 9,040m (7,386) Gross 120-month ERC (Estimated Remaining Collections) increased 26 per cent to SEK 15,316m (12,182) The total capital ratio improved to per cent (12.74) The CET1 ratio was per cent (9.24) Subsequent events Hoist Finance acquired an extensive and diversified loan portfolio on 1 July for a total investment of SEK 1,256m SEKm Change % Change % Gross cash collections ,625 1, Net revenue from acquired loan portfolios Total revenue , EBIT* EBIT margin, % pp pp Profit before tax Net profit Basic earnings per share, SEK 1) N/A 0.58 N/A Diluted earnings per share, SEK 1) N/A 0.57 N/A Acquisition of loan portfolios , * The Jan-Jun period includes IPO costs of SEK 46m that have a negative impact on EBIT. 30 Jun 30 Jun Change % 31 Dec Carrying value of acquired loans, SEKm 2) 9,040 7, ,921 Gross 120-month ERC, SEKm 3) 15,316 12, ,576 Return on equity, % pp 16 Total capital ratio, % pp CET1 ratio, % pp 9.35 Liquidity ratio, % pp 50 Number of employees (FTEs) 1, ,077 1) Includes effect of 983,913 outstanding warrants. 2) Including run-off consumer loan portfolio and portfolios held in joint venture. 3) Excluding run-off consumer loan portfolio and portfolios held in joint venture. Hoist Finance AB (publ) (the Company or the Parent ) is the parent company of the Hoist Finance group of companies ( Hoist Finance ). The Company s wholly owned subsidiary, Hoist Kredit AB (publ) ( Hoist Kredit ) is a regulated credit market company. Hence, Hoist Finance produces financial statements in accordance with the guidance and format set forth in the Swedish Annual Accounts Act for Credit Institutions and Securities Companies. In order to assess the operational performance of the debt purchasing and collection operations and to facilitate comparison with our competitors, Hoist Finance supplements its statutory financial statements with an operating income statement. The operating income statement is prepared based on the accounting and valuation principles used in the statutory financial statements, with no amendments or adjustments thereto. The information in this interim report has been published pursuant to the Swedish Securities Market Act and/or Swedish Financial Instruments Trading Act. This information was submitted for publication on 31 July at 8.00 A.M. (CET).

2 Statement by the CEO Continued stable earnings trend and high market activity Hoist Finance continued its stable growth with a good earnings trend during the second quarter of. Gross as well as net revenue from acquired loan portfolios was the highest ever, as was total revenue. EBIT was up 22 per cent year-on-year. The EBIT margin was impacted by the rise in legal collections during the quarter, particularly in the UK. This has increased costs in the short term according to plan. High market activity and the single largest acquisition to date The second quarter was primarily distinguished by high market activity with negotiations and acquisitions in multiple markets, including the acquisitions of loan portfolios in Poland, Italy and Germany. Major efforts were also focused on preparing for the significant Compello acquisition in the UK. All of these portfolios will generate revenue as of the third quarter. We are very pleased to have completed its single largest transaction to date on July 1st with the acquisition of debt management company Compello Holdings. The acquisition includes a diversified banking portfolio, comprised of over one million overdue loans from 19 financial institutions and an established collection platform with 178 employees. At 30 June the portfolio had estimated collections (ERC) of approximately SEK 2,823m over 120 months. This acquisition is highly consistent with our strategy to develop and strengthen our position in key markets. It also enables us to increase our operational capacity and thereby consolidate our market position among core banking customers in the UK. The acquisition will not give rise to any acquisition goodwill, as the entire purchase price is related to the debt portfolios. The total investment is SEK 1,256 million. Overall, Hoist Finance has thus far this year acquired portfolios valued at SEK 2.5 billion, including Compello, which is well in line with our target for. A growing market The supply of non-performing consumer loans is expected to remain strong due to the growing need of many European banks to divest loan portfolios. Although the market remains competitive, we have not seen any discernible changes in pricing during the year. We have, however, seen greater pricing harmonisation between countries. Strategy for continued profitable growth In line with our successful strategy, we will continue to ensure longterm profitable growth. Our strategy is based on wide geographical presence, a focused acquisition model based on well-structured processes, and long-term instalment plans founded on fair and amicable settlements. As always, we focus on deepening our relationships with partners in existing markets and following them into new markets, while also working to strengthen our position as a permanent work-out unit for the largest international banks. We also actively evaluate various opportunities to enter new European markets. Another important component of Hoist Finance s strategy is to have well-diversified financing through deposits from the public as well as the bond market. Hoist Finance s capital adequacy was considerably strengthened through the new share issues conducted in and in conjunction with the IPO in. As a credit market company Hoist Finance is well versed in what it means to operate in a regulated environment with internal governance, risk management and control, and is thus able to meet its partners high standards. Outlook With a strong financial position and over 20 years experience, and as leading partner to many international banks, Hoist Finance is well positioned to capitalise on the growing market. We also see good acquisition opportunities during the remainder of the year. Accordingly, our assessment is that we will achieve or exceed our indicated acquisition volumes for ie, volumes in line with or higher than recent years. Jörgen Olsson CEO Hoist Finance AB (publ) Hoist Finance AB (publ) Interim report January June 2

3 Second quarter Second quarter Unless otherwise specified, all market, financial and operational comparisons refer to the second quarter of. The analysis below follows the operating income statement. Revenue Gross cash collections increased to SEK 834m (615), chiefly due to the large portfolio acquisitions made in. Revenue growth remains stable due to the high level of acquisition activity. Portfolio acquisitions totalled SEK 665m (897) during the quarter, mainly attributable to Poland, Italy and Germany, and will start to generate revenue as of the third quarter. Portfolio amortisation increased 29 per cent to SEK 360m (278). The increase is chiefly attributable to the increased volume of acquired loan portfolios and an normalised collection rate, from the portfolio acquired in Poland during Q In line with loan amortisation, interest income from the run-off consumer loan portfolio decreased during the period to SEK 3m (10). Net revenue from acquired loan portfolios consequently increased 37 per cent to SEK 477m (347). Fee and commission income increased 8 per cent to SEK 42m (39). The greater part of this increase is attributable to the UK operations and to the business in Poland, which has revenues from third-party cash collection. Profit from participation in the joint venture in Poland increased 13 per cent to SEK 15m (13). Total year-on-year revenue increased to SEK 537m (401). Operating expenses Personnel expenses increased 39 per cent to SEK 153m (110), due primarily to greater Group business volumes and to Hoist Finance s in-house collection platforms in Italy and Poland following company acquisitions in those regions. The Group had 1,174 FTEs (792) as at 30 June. Most of this increase is attributable to the above-referenced company acquisitions in Poland and Italy. Other operating expenses increased 39 per cent during Q2 to SEK 212m (152). The increase is mainly attributable to the added legal collection expenses incurred by the UK operations. The remaining increase is a result of acquisitions and greater business volumes. Depreciation and amortisation of tangible and intangible fixed assets totalled SEK 11m (7). The increase is attributable to production systems acquired in TRC in Italy and to continued investments in Group IT systems. Financial items Financial items as per the Company s segment reporting totalled SEK 109m ( 76). Interest income (excluding run-off consumer loan portfolio) decreased to SEK 12m (12). This also includes changes in the market value of interest-bearing securities (Treasury bills, bonds and other interest-bearing securities) of SEK 13m. Interest expense totalled SEK 93m (82) and is mainly comprised of the SEK 49m (51) interest expense related to the deposits offered by HoistSpar. Due to the adjustment of loan terms to the prevailing market situation, the rise in deposits from the public has not resulted in higher interest expense. Also included is an interest expense of SEK 27m (18) related to the senior unsecured debts, attributable to the bond issued during Q4. Fees for the deposit guarantee scheme and stability levy of SEK 8m (8) are also included in interest expense. Net income from financial transactions totalled SEK 4m ( 7), generated primarily from the hedging of currencies and interest rates via derivatives (mostly valuation effects from interest derivatives). Hoist Finance hedges interest rate risk on a continuous basis, currently in the short and medium term. Some old corporate loans were settled in line with operational streamlining, giving rise to a loan loss of SEK 5m and leaving SEK 31m in corporate loans outstanding. Portfolio acquisitions Gross cash collections EBIT and EBIT margin Profit before tax SEKm SEKm SEKm % SEKm 1, Q Q2 Q Q Q2 Q Q EBIT Q2 EBIT margin Q Q Q2 Q2 Portföljförvärv Inkasserade belopp på förvärvade fordringsportföljer EBIT och EBIT-marginal Resultat före skatt Hoist MSEK Finance AB (publ) Interim report MSEKJanuary June MSEK % MSEK

4 Second quarter Cash flow Funding and capital structure SEKm SEKm 30 Jun 30 Jun Change % 31 Dec Cash flow from operating activities 284 1, ,793 Cash flow from investing activities Cash flow from financing activities Cash flow for the period 387 1, ,581 Cash flow from operating activities improved to SEK 284m ( 1,009) due to higher deposit volumes in HoistSpar and improved cash flow of payments from acquired loan portfolios. HoistSpar is a competitive product on the deposit market and Hoist Finance sees stable growth in increased volumes as well as new customers. The SEK 412m increase in deposit volumes during the second quarter was entirely attributable to deposits on fixed terms of 12, 24 and 36 months. The cash flow of payments from acquired loan portfolios increased to SEK 834m (615) and portfolio acquisitions totalled SEK 604m (1,093). Cash flow from investing activities, including translation differences, totals SEK 661m ( 360). The change is due to increased investments in bonds and other securities as a result of improved cash flow from operating activities. Cash flow from financing activities totals SEK 11m (300) and is comprised of a warrant buy-back and interest paid on convertible debt instruments. Total cash flow for the quarter totals SEK 387m ( 1,069). Deposits from the public 12,768 8, ,987 Subordinated liabilities Senior unsecured debt 1, ,493 Total interest-bearing liabilities 14,562 9, ,813 Other liabilities Shareholders' equity 2,148 1, ,397 Total liabilities and shareholders' equity 17,403 11, ,062 Cash and interestbearing securities 7,654 3, ,560 Other assets 9,749 7, ,501 Total assets 17,403 11, ,062 Liquidity ratio, % pp 50 CET1 ratio, % pp 9.35 Total capital ratio, % pp Acquired loans Portfolio acquisitions 938 1, ,227 Carrying value of acquired loans 1 9,040 7, ,921 Gross 120-month ERC 2) 15,316 12, ,576 1) Including run-off consumer loan portfolio and portfolios held in joint venture. 2) Excluding run-off consumer loan portfolio and portfolios held in joint venture. Balance Sheet Total assets increased 50 per cent to SEK 17,403m (11,615). The increase is primarily attributable to an SEK 1,868m (128%) increase in bonds and other securities, an SEK 1,724m (25%) increase in loan portfolio carrying value, and an SEK 465m (37%) increase in Treasury bills and Treasury bonds. Total liabilities amount to SEK 15,255m (10,410). The increase is mainly due to an SEK 3,855m (43%) increase in deposit volumes and an additional bond issue of SEK 718m (97%). Hoist Finance funds its operations through deposits from the public and through the bond market. Deposits from the public total SEK 12,768m (8,913). Of this amount, SEK 5,334m is attributable to fixed term deposits of 12-, 24- and 36-month durations. In line with its funding structure diversification strategy, Hoist Finance issued a bond denominated in EUR in. As at 30 June, outstanding bond debt totalled SEK 1,459m. Group equity totals SEK 2,148m (1,205). The capital base was strengthened substantially through the new share issues in and the new share issue in connection with the listing. The total capital ratio improved to (12.74) per cent and the CET1 (Common Equity Tier 1) ratio to (9.24) per cent. The Company is thus well capitalised for further expansion in the acquisition of non-performing consumer loans. Cash and interest-bearing securities total SEK 7,654m (3,809). The liquidity ratio is 59 (41) per cent of deposits from the public. Basic earnings per share total SEK 0.53 (0.79). Interest on the subordinated liabilities is included in the calculation. Hoist Finance AB (publ) Interim report January June 4

5 Second quarter Risk development Hoist Finance had a year-on-year volume increase in loan portfolios of approximately SEK 1,724m at the close of Q2, attributable mainly to portfolio acquisitions in Poland, Italy and Germany. Loan portfolio credit risk is deemed to have increased during Q2 proportionally with the volume of acquired loans. Portfolio credit quality is still deemed good. Operational risks increased (although at a lower rate than growth) as a result of acquisitions and greater business volumes. The main reasons for the increase are deemed to stem from increased risks (in the form of systems integrations and differences in corporate cultures) associated with the integration of acquired companies, and legal and tax risks associated with the Group operating in several European countries. Hoist Finance has limited these risks through increased focus on the quality of internal processes and will continue working this year on quality improvements in various areas. Hoist Finance s capital position in terms of the CET1 and total capital ratios increased significantly year-on-year, due in part to business growth during Q2. Also, due to the reallocation of liquid assets resulting from the Compello Holdings Ltd acquisition, the Company holds capital as of the close of June to cover around half of its acquisition volume. The capital ratio improved significantly year-on-year, mainly due to new share issues conducted in and at listing in March and the fact that the company decided to reinvest the profits generated by the business. The liquidity ratio increased from 41 per cent to 59 per cent yearon-year, due primarily to the issuance of a EUR bond, higher deposit volumes, and the new share issue conducted in connection with listing during the spring of. Other information Employees The Group had 1,174 (792) FTEs during Q2. The year-on-year increase of 382 FTEs is mainly attributable to the acquisitions in Poland (182) and Italy (146). Parent Company The Parent Company reported a small pre-tax loss of SEK 2m ( 2). The share and shareholders Hoist Finance was listed on the NASDAQ Stockholm Mid Cap List on 25 March. The price per share was set at SEK 58, corresponding to a market capitalisation of SEK 4,555m. As at 30 June the share price closed at SEK Ownership structure Name Capital and votes, % Swedbank Robur fonder AB 9.1 Toscafund Asset Management LLP 9.1 Carve Capital AB 9.0 Olympus Investment S,àr,l, 7.5 Beagle Investments S,A, 7.0 Deciso AB 6.1 Thoupos Costas 4.2 Norges Bank Investment Management 4.1 Zenit funds 3.8 SHB funds 3.1 Carnegie funds 2.5 The Confederation of Swedish Enterprise 1.9 Echiquier funds 1.9 Per Josefsson Invest AB 1.7 Skandia Liv 1.3 Other shareholders 27.7 Total Source: SIS Ownership Service, 30 June Subsequent events After the close of the period Hoist Finance acquired an extensive and diversified loan portfolio in the UK through the shares in Compello Holdings Limited. The acquisition includes a diversified portfolio of claims on banks, comprised of over one million overdue loans from 19 financial institutions and an established call centre with 178 employees. At 30 June the portfolio has estimated collections of approximately SEK 2,823m over 120 months (ERC). The total investment is SEK 1,256m. Following the acquisition the CET1 capital adequacy ratio for the second quarter changed from to pro forma. Review This interim report has not been reviewed by the Company s auditor. Hoist Finance AB (publ) Interim report January June 5

6 Quarterly overview Quarterly overview Segment reporting Quarter 1 Quarter 4 Quarter 3 Gross cash collections 834, , , , ,479 Portfolio amortisation and revaluation 360, , , , ,348 Interest income from run-off consumer loan portfolio 2,994 3,118 5,641 11,907 9,566 Net revenue from acquired loan portfolios 476, , , , ,697 Fee and commission income 41,747 47,616 39,467 36,881 39,111 Earnings from participations in joint ventures 14,946 15,350 17,918 15,671 13,203 Other income 3,439 1,546 5,904 2,226 2,205 Total revenue 536, , , , ,216 Personnel expenses 153, , , , ,255 Other operating expenses 211, , , , ,843 Depreciation and amortisation of tangible and intangible assets 10,859 10,753 9,623 6,880 7,267 Total operating expenses 375, , , , ,365 EBIT 161, , , , ,851 Interest income excl. run-off consumer loan portfolio 12,111 4,745 7,525 21,462 12,284 Interest expense 92,876 92,621 93,437 85,498 81,653 Net income from financial transactions 3,779 20,259 16,321 2,507 6,518 Total financial items 108, , ,233 61,529 75,887 Profit before tax 52,342 7,145 47,528 65,238 55,964 Key ratios, segment reporting SEKm Quarter 1 Quarter 4 Quarter 3 EBIT margin, % Portfolio acquisitions Carrying value of acquired loans 9,040 8,827 8,921 7,504 7,386 CET1 ratio, % Gross 120-month ERC 1) 15,316 15,238 15,576 12,657 12,182 1) Excluding run-off consumer loan portfolio and portfolios held in joint venture. Hoist Finance AB (publ) Interim report January June 6

7 Segment overview Segment overview Hoist Finance purchases and manages receivables in eight European countries, all of which have different traditions for providing financial services, different legislative frameworks and different attitudes with respect to past due receivables and repayment patterns. Carrying value, acquired loan portfolios per market, 30 June SEK 9 040m Germany/Austria 25% Belgium, the Netherlands, France 22% UK 21% Italy 14% Poland 16% Joint Venture in Poland 2% Germany and Austria Belgium, the Netherlands and France UK Italy Poland Central Functions and Eliminations Gross cash collections 99,004 88, ,681 84,717 63, ,615 Total revenue 103,785 89, ,136 86,752 72,810 13, ,747 Total operating expenses 60,604 48, ,936 44,778 21,327 69, ,639 EBIT 43,181 40,795 39,200 41,974 51,483 55, ,108 EBIT margin, % Carrying value of acquired loan portfolios 2,221,057 1,981,923 1,900,387 1,264,030 1,449, ,024 9,039,614 Gross 120-month ERC 1), SEKm 3,616 3,178 3,335 2,443 2,744 15,316 1) Excluding run-off consumer loan portfolio and portfolios held in joint venture. Group Hoist Finance AB (publ) Interim report January June 7

8 Segment overview The earnings trend for each operating segment, excluding Central Functions and Eliminations, is set forth below. Germany and Austria Change % Change % Full year Gross cash collections 210, , , , ,044 Portfolio amortisation and revaluation 114,302 84, , , ,873 Interest income from run-off consumer loan portfolio 2,994 9, ,112 20, ,180 Net revenue from acquired loan portfolios 99,004 80, , , ,351 Fee and commission income 1,416 4, ,095 9, ,889 Other income 3,365 2, ,527 4, ,294 Total revenue 103,785 88, , , ,534 Personnel expenses 35,781 32, ,676 64, ,245 Other operating expenses 23,954 20, ,151 35, ,272 Depreciation and amortisation of tangible and intangible assets ,744 1, ,940 Total operating expenses 60,604 53, , , ,457 EBIT 43,181 34, ,146 87, ,077 EBIT margin, % pe pe 50 Expenses/Gross cash collections, % pe pe 25 Carrying value of acquired loan portfolios 1) 2,221,057 2,010, N/A N/A 2,350,392 Gross 120-month ERC, SEKm 2) 3,616 3, N/A N/A 3,817 1) Including run-off consumer loan portfolio. 2) Excluding run-off consumer loan portfolio. Operating income Gross cash collections increased 35 per cent during the second quarter to SEK 210m (155). This increase is largely attributable to two large acquisitions. Portfolio amortisation totalled SEK 114m (84) during the quarter, with the increase due to a higher collection rate. Revenues from the run-off consumer loan portfolio decreased to SEK 3m (10) in pace with gradual amortisation of the portfolio. Fee and commission income was lower year-on-year, due primarily to Hoist Finance s acquisition of a significant portfolio it had previously serviced for a third party. EBIT The segment s EBIT totalled SEK 43m (35) for the quarter with a corresponding EBIT margin of 42 per cent (39). The profitability improvement is attributable to increased collections, with operating expenses increasing to a lesser extent. Acquisitions Second quarter acquisition activity was higher year-on-year. The carrying value of acquired loan portfolios was SEK 2,221m (2,010) at 30 June. Gross ERC for the same period totalled SEK 3,616m (3,235). Operating expenses Second quarter operating expenses increased to SEK 61m (53). Most of the increase is attributable to collection expenses, including fees payable to partners and initiation of legal proceedings. Some internal functions located in Germany were reclassified as Group functions during Q2 and, as a result, costs associated with these functions are now included in the Central Functions operating segment. The carrying costs for the current and previous years have been reclassified accordingly. Other Although Austria currently represents a small portion of the segment, Hoist Finance continues to consider it an attractive market. Due to the acquisitions made during the second half of, revenue contribution was higher than last year despite the fact that no acquisitions were made during the second quarter. Hoist Finance AB (publ) Interim report January June 8

9 Segment overview Belgium, the Netherlands and France Change % Change % Full year Gross cash collections 234, , , , ,474 Portfolio amortisation and revaluation 146, , , , ,991 Net revenue from acquired loan portfolios 88,078 77, , , ,483 Fee and commission income 1,636 1, ,451 3, ,989 Other income 8 0 N/A 8 0 N/A 218 Total revenue 89,706 78, , , ,690 Personnel expenses 21,389 21, ,831 40, ,886 Other operating expenses 27,011 23, ,931 44, ,656 Depreciation and amortisation of tangible and intangible assets ,320 1, ,679 Total operating expenses 48,911 45, ,082 86, ,221 EBIT 40,795 32, ,899 46, ,469 EBIT margin, % pe pe 24 Expenses/Gross cash collections, % pe pe 25 1) Carrying value of acquired loan portfolios 1,981,923 2,084,060 5 N/A N/A 2,194,000 Gross 120-month ERC, SEKm 3,178 3,423 7 N/A N/A 3,512 1) Excluding non-recurring expenses. Operating income Second quarter gross cash collections increased 22 per cent to SEK 234m (192) and portfolio amortisation increased to SEK 146m (115). Belgium is responsible for a large part of the increase in both gross cash collections and portfolio amortisation, with unusually large VAT recoveries contributing to high collection levels. The Netherlands also had good second quarter revenues, buoyed somewhat by seasonal fluctuations. Fee and commission income originated from third-party services offered via the French operations. Operating expenses Operating expenses for the second quarter total SEK 49m (46). The increase is primarily attributable to the Netherlands, which saw an increase in both the number of employees and the collection activity level. Restructuring efforts have continued in France, and support functions were migrated from the Guyancourt office to the Lille office established by Hoist Finance in. As of the close of Q2 Hoist Finance has no employees in Guyancourt and has closed its office there, which is seen in the lower personnel expenses in France. EBIT The segment s EBIT totalled SEK 41m (33) for the quarter with a corresponding EBIT margin of 45 per cent (42). Acquisitions The segment s acquisitions during Q2 were conducted predominantly in the Netherlands, with only an insignificant portion conducted in France and Belgium. Overall, the segment s acquired volumes are lower year-on-year. This does not apply to the French market, however, where acquired volumes (including acquisitions concluded during early Q3) already exceed full-year. The carrying value of acquired loan portfolios totalled SEK 1,982m (2,084) at 30 June. Gross ERC for the same period decreased to SEK 3,178M (3,423). Hoist Finance AB (publ) Interim report January June 9

10 Segment overview Great Britain Change % Change % Full year Gross cash collections 162, , , , ,346 Portfolio amortisation and revaluation 20,835 52, , , ,802 Net revenue from acquired loan portfolios 141,681 72, , , ,544 Fee and commission income 27,379 32, ,548 64, ,344 Other income 1, , ,686 Total revenue 170, , , , ,574 Personnel expenses 41,383 30, ,649 63, ,502 Other operating expenses 88,682 33, ,911 71, ,601 Depreciation and amortisation of tangible and intangible assets 871 1, ,726 3, ,588 Total operating expenses 130,936 65, , , ,691 EBIT 39,200 40, ,235 78, ,883 EBIT margin, % pe pe 40 Expenses/Gross cash collections, % pe pe 28 1) Carrying value of acquired loan portfolios 1,900,387 1,438, N/A N/A 1,797,520 Gross 120-month ERC, SEKm 3,335 2, N/A N/A 3,391 1) ) Excluding non-recurring expenses. Operating income Gross cash collections during the second quarter totalled SEK 163m (125). The change is chiefly attributable to loan portfolios acquired during the second half of and to a favourable currency trend. Portfolio amortisation totalled SEK 21m (52). Due to an initially high cost burden for a large portfolio acquired during Q4, the amortisation rate remained relatively low during the quarter. The portfolio also has an impact on Other operating expenses. Fee and commission income, derived from services offered to third parties, has declined as the UK operations have been adapted to Hoist Finance s strategy focused on loan portfolio acquisitions. Operating expenses Operating expenses increased 100 per cent on a quarterly basis to SEK 131m (66). Increased personnel expenses are a consequence of Hoist Finance adjusting its workforce to acquired business volumes. The increase in Other operating expenses is mostly attributable to a rise in legal collection expenses and the negative (from a cost perspective) currency trend. EBIT The segment s EBIT totalled SEK 39m (40) for the quarter with a corresponding EBIT margin of 23 per cent (38). Acquisitions Extensive work was carried out during the second quarter in preparation for the acquisition of Compello Holdings, completed during the first days of Q3. The year-on-year acquisition level was lower but, in terms of future collections, the strong start to Q3 will more than compensate for this. The carrying value of acquired loan portfolios totalled SEK 1,900m (1,438) at 30 June. Gross ERC for the same period increased to SEK 3,335m (2,496). Other The acquired debt purchase company, Compello Holdings Limited, adds a diversified portfolio of claims on banks, comprised of over one million overdue loans from 19 financial institutions and an established call centre with 178 employees. At 30 June the portfolio has estimated collections (ERC) of approximately SEK 2,823m over 120 months. Hoist Finance AB (publ) Interim report January June 10

11 Segment overview Italy Change % Change % Full year Gross cash collections 127,465 60, , , ,828 Portfolio amortisation and revaluation 42,748 22, ,726 46, ,324 Net revenue from acquired loan portfolios 84,717 38, ,226 64, ,504 Fee and commission income 1,705 N/A 2,912 N/A 0 Other income 330 N/A 675 N/A 311 Total revenue 86,752 38, ,813 64, ,815 Personnel expenses 14,642 N/A 27,339 N/A 17,854 Other operating expenses 28,526 14, ,061 23, ,028 Depreciation and amortisation of tangible and intangible assets 1,610 N/A 3,184 N/A 2,340 Total operating expenses 44,778 14, ,584 23, ,222 EBIT 41,974 23, ,229 41, ,593 EBIT margin, % pe pe 37 Expenses/Gross cash collections, % pe pe 41 Carrying value of acquired loan portfolios 1,264, , N/A N/A 1,181,210 Gross 120-month ERC, SEKm 2, N/A N/A 2,407 Operating income Gross cash collections in the second quarter increased 110 per cent to SEK 127m (61). The increase is attributable to the acquisition from TRC in April and the large acquisition made in December. Portfolio amortisation during Q2 totalled SEK 43m (23), with the increase chiefly due to the above-named December acquisition. Fees and commission income and Other income, totalling SEK 2m, relate to services rendered by the business integrated during Q3. Operating expenses The substantial change in operating expenses, which increased 214 per cent to SEK 45m (14), reflects the fact that Hoist Finance now operates its own collection platform in Italy, with 146 employees. Integration of the business and associated IT systems acquired in resulted in Hoist Finance s depreciation of tangible and intangible assets in Italy. Additionally, Hoist Finance is now implementing extensive collection activities, both in-house and via external partners, for the substantial loan portfolios acquired in. EBIT The segment s EBIT totalled SEK 42m (24) for the quarter with a corresponding EBIT margin of 48 per cent (63). Acquisitions Year-on-year acquisition activity was somewhat lower during the quarter. The carrying value of acquired loan portfolios totalled SEK 1,264m (519) at 30 June. Gross ERC for the same period increased to SEK 2,443m (839). Hoist Finance AB (publ) Interim report January June 11

12 Segment overview Poland Change % Change % Full year Gross cash collections 99,456 81, , , ,619 Portfolio amortisation and revaluation 36,321 3, ,001 9,224 N/A 17,030 Net revenue from acquired loan portfolios 63,135 77, , , ,589 Fee and commission income 9,611 N/A 18,357 N/A Other income 64 N/A 97 0 N/A 0 Total revenue 72,810 77, , , ,589 Personnel expenses 5, , N/A 2,035 Other operating expenses 15,155 16, ,570 28, ,812 Depreciation and amortisation of tangible and intangible assets N/A 1, N/A 0 Total operating expenses 21,327 17, ,719 29, ,847 EBIT 51,483 60, , , ,742 EBIT margin, % pe pe 72 Expenses/Gross cash collections, % pe pe 26 Carrying value of acquired loan portfolios 1,449,193 1,114, N/A N/A 1,182,459 Gross 120-month ERC, SEKm 2,744 2, N/A N/A 2,449 Operating income Second quarter gross cash collections increased 22 per cent to SEK 99m (82). The rate of increase in portfolio amortisation (considerably higher than the increase in gross cash collections) is chiefly attributable to a large portfolio acquired during Q The amortisation rate has normalised with the increase in this portfolio s cash flow. The increase in fee and commission income is due entirely to services offered to third parties by Navi Lex, acquired by Hoist Finance during Q4. Operating expenses For the past year Hoist Finance has managed the Polish operations in accordance with a business model that involves many more in-house activities. In contrast to Q2 when the workforce was comprised of a small Warsaw sales office, Hoist Finance employed 186 FTEs in Poland as at 30 June. Because there were 152 FTEs at the beginning of the quarter, personnel expenses for the quarter do not fully correspond to the cost of 186 FTEs. Employees in Poland also perform services for third parties, although the emphasis has shifted as the management of Hoist Finance s portfolios has been gathered in the internal platform. Accordingly, expenses that were previously Other external operating expenses are shifting to Internal personnel expenses. Total operating expenses increased 24 per cent to SEK 21m (17). EBIT The segment s EBIT totalled SEK 51m (61) for the quarter with a corresponding EBIT margin of 71 per cent (78). The relatively low operating expenses as compared with gross cash collections reflect a profitable market in which we have historically acquired portfolios with relatively good returns. Acquisitions Acquisition activity picked up significantly during the second quarter following a cautious start to the year. The total acquisition volume for the first half of exceeds the corresponding period for. The carrying value of acquired loan portfolios totalled SEK 1,449m (1,115). Gross ERC for the same period increased to SEK 2,744m (2,189). Other The activity plan for an additional portfolio was reviewed and expense and gross cash collection forecasts were updated during the second quarter as part of the continued integration of Navi Lex. One effect of this is an increase of SEK 6m in the portfolio s amortisation. This revaluation is included in the second quarter figures for Portfolio amortisation and revaluation. Hoist Finance AB (publ) Interim report January June 12

13 Financial statements Financial statements Consolidated income statement Note Full year Net revenues from acquired loan portfolios 1 473, , , ,268 1,398,291 Interest income 9,117 21,850 1,254 43,196 89,731 Interest expense 92,876 81, , , ,969 Net interest income 371, , , ,430 1,143,053 Fee and commission income 41,747 39,111 89,363 76, ,222 Net income from financial transactions 1,519 6,518 18,740 3,905 17,719 Other income 3,439 2,205 4,985 4,089 12,219 Total operating income 418, , , ,488 1,290,775 General administrative expenses Personnel expenses 153, , , , ,200 Other operating expenses 211, , , , ,467 Depreciation and amortisation of tangible and intangible assets 10,859 7,267 21,612 13,778 30,281 Total operating expenses 375, , , ,837 1,130,948 Profit before credit losses 42,694 42,761 34,489 80, ,827 Net credit losses 5,298 5,298 Earnings from participations in joint ventures 14,946 13,203 30,296 25,073 58,662 Profit before tax 52,342 55,964 59, , ,489 Income tax expense 8,178 12,266 11,683 23,522 38,386 Profit for the period 44,164 43,698 47,804 82, ,103 Profit attributable to: Owners of Hoist Finance AB (publ) 44,164 43,698 47,804 82, ,103 Basic earnings per share 1) Diluted earnings per share 1) 2) ) A 1:3 split was conducted in February. 2) Includes effect of 983,913 outstanding warrants. Hoist Finance AB (publ) Interim report January June 13

14 Financial statements Consolidated statement of comprehensive income Full year Profit for the period 44,164 43,698 47,804 82, ,103 Other comprehensive income Items that will not be reclassified to profit or loss Revaluation of defined benefit pension plan 1,710 Revaluation of remuneration after terminated employment 1,120 Tax 872 Total items that will not be reclassified to profit or loss 1,958 Items that may be reclassified subsequently to profit or loss Currency translation differences on foreign operations 16,712 39,829 10,308 36,485 23,154 Hedging of currency risk in foreign operations 4,307 29,133 1,851 31,593 32,584 Total items that may be reclassified subsequently to profit or loss 12,405 10,696 12,159 4,892 9,430 Other comprehensive income for the period 12,405 10,696 12,159 4,892 7,472 Total comprehensive income for the period 31,759 54,394 35,645 87, ,575 Profit attributable to: Owners of Hoist Finance AB (publ) 31,759 54,394 35,645 87, ,575 Hoist Finance AB (publ) Interim report January June 14

15 Financial statements Consolidated balance sheet Note 30 Jun 31 Dec 30 Jun ASSETS Cash Treasury bills and Treasury bonds 1,723,545 2,316,110 1,258,740 Lending to credit institutions 2,605,891 1,292,711 1,086,763 Lending to the public 102, , ,659 Acquired loan portfolios 2 8,734,711 8,586,782 7,010,871 Bonds and other securities 3,324,691 1,951,241 1,457,021 Participations in joint ventures 223, , ,302 Intangible fixed assets 244, ,048 66,829 Tangible fixed assets 29,999 32,000 29,110 Other assets 270, , ,602 Deferred tax assets 63,430 70,885 63,665 Prepaid expenses and accrued income 80,142 58,192 35,895 Total assets 17,403,363 15,061,829 11,614,696 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Deposits and borrowing from the public 12,768,384 10,987,289 8,913,034 Tax liabilities 25,345 52,326 32,523 Other liabilities 402, , ,863 Deferred tax liabilities 62,242 50,419 57,606 Accrued expenses and prepaid income 144, , ,900 Provisions 58,247 68,704 47,349 Senior unsecured debt 1,458,626 1,493, ,355 Subordinated liabilities 334, , ,952 Total liabilities and provisions 15,255,017 13,664,639 10,409,582 Shareholders' equity Share capital 26,178 21,662 17,207 Other contributed equity 1,756,424 1,003, ,579 Reserves 14,971 2,812 7,350 Retained earnings including profit for the period 380, , ,678 Total shareholders' equity 2,148,346 1,397,190 1,205,114 Total liabilities and shareholders' equity 17,403,363 15,061,829 11,614,696 Pledged assets 1,106 1,903 5,886 Commitments 436, , ,151 Hoist Finance AB (publ) Interim report January June 15

16 Financial statements Consolidated statement of changes in shareholders equity Share capital Other contributed capital Reserves Translation reserve Retained earnings including profit for the period Total share-holders' equity Opening balance 1 Jan 21,662 1,003,818 2, ,522 1,397,190 Comprehensive income for the period Profit for the period 47,804 47,804 Other comprehensive income 12,159 12,159 Total comprehensive income for the period 12,159 47,804 35,645 Transactions reported directly in equity New share issue 4, ,545 1) Warrants, repurchased and cancelled 94 3,177 3,271 Interest paid on capital contribution 7,500 7,500 Acquisition of minority shareholding in subsidiary 32,584 32,584 Tax effect on items reported directly in equity ,650 8,805 Total transactions reported directly in equity 4, ,606 41, ,511 Closing balance 30 Jun 26,178 1,756,424 14, ,715 2,148,346 1) Nominal amount of SEK 778,068,000 was reduced by transaction costs of SEK 32,523,000. Share capital Other contributed capital Reserves Translation reserve Retained earnings including profit for the period Total share-holders' equity Opening balance 1 Jan 15, ,370 12, , ,442 Comprehensive income for the period Profit for the period 180, ,103 Other comprehensive income 9,430 1,958 7,472 Total comprehensive income for the period 9, , ,575 Transactions reported directly in equity New share issue 6, ,310 2) 514,484 Interest paid on capital contribution 28,750 28,750 Paid-in premium for warrants 5,138 5,138 Conversion of convertible bond 100, ,000 Tax effect on items reported directly in equity 3,301 3,301 Total transactions reported directly in equity 6, ,448 25, ,173 Closing balance 31 Dec 21,662 1,003, ,522 1,397,190 2) Nominal amount of SEK 527,160,000 was reduced by transaction costs of SEK 18,850,000. Share capital Other contributed capital Reserves Translation reserve Retained earnings including profit for the period Total share-holders' equity Opening balance 1 Jan 15, ,370 12, , ,442 Comprehensive income for the period Profit for the period 82,202 82,202 Other comprehensive income 4,892 4,892 Total comprehensive income for the period 4,892 82,202 87,094 Transactions reported directly in equity New share issue 1, ,209 3) 315,928 Interest paid on capital contribution 15,000 15,000 Tax effect on items reported directly in equity 1,650 1,650 Total transactions reported directly in equity 1, ,209 13, ,578 Closing balance 30 Jun 17, ,579 7, ,678 1,205,114 3) Nominal amount of SEK 331,244,000 was reduced by transaction costs of SEK 17,035,000. Hoist Finance AB (publ) Interim report January June 16

17 Financial statements Consolidated cash flow statement Full year OPERATING ACTIVITIES Gross cash collections 834, ,480 1,624,833 1,151,002 2,541,310 Paid-in interest 9,117 14,778 1,254 31,883 89,731 Provisions received 41,747 39,111 89,363 76, ,222 Other operating income 3,439 2,206 4,985 4,089 12,220 Interest paid 53,916 32, ,760 74, ,982 Operating expenses 385, , , ,558 1,093,078 Net cash flow from financial transactions 1,518 6,518 18,741 3,905 17,719 Capital gain on redemption of joint venture certificates 15,673 2,464 15,673 2,464 27,941 Income tax paid 10,188 10,867 19,862 40,443 52,292 Total 437, , , ,088 1,386,353 Increase/decrease in acquired loans incl. translation differences 603,520 1,092, ,331 1,531,670 3,731,866 Increase/decrease in joint venture certificates 5,691 1,329 5,691 1,329 13,544 Increase/decrease in lending to the public 28,620 86,476 49, , ,719 Increase/decrease in deposits and borrowing from the public 412, ,411 1,713, ,184 1,215,800 Increase/decrease in other assets 83,785 87,414 51,283 67,208 94,502 Increase/decrease in other liabilities 99,274 8, ,419 53, ,124 Increase/decrease in provisions 5,753 17,780 10,457 47,288 25,933 Change in other balance sheet items 6,440 4,262 3,893 1, Total 153,743 1,340, ,756 2,441,428 2,144,424 Net Cash from operating activities 283,995 1,009,333 1,428,218 1,793, ,071 INVESTING ACTIVITIES Investments in intangible fixed assets 6,780 7,972 18,713 10,552 64,286 Investments in tangible fixed assets 2,815 4,300 3,268 14,247 Acquisition of business(es) 50,569 49,434 Investments in bonds and other securities 650, ,702 1,373, , ,564 Net Cash from investing activities 660, ,674 1,447, , ,531 FINANCING ACTIVITIES New share issue 315, , , ,484 Paid-in premium for warrants 5,139 Warrants, repurchased and cancelled 3,217 3,271 Issued bonds 74, ,007 Interest paid on capital contribution 7,500 15,000 7,500 15,000 28,750 Net Cash from financing activities 10, , , ,050 1,221,880 Net Cash flow for the period 387,295 1,068, ,476 1,581, ,722 Cash and cash equivalents at the beginning of the period 4,716,932 3,414,699 3,609,161 3,926,883 3,926,883 Cash and cash equivalents at the end of the period 1) 4,329,637 2,345,742 4,329,637 2,345,742 3,609,161 1) Consists of cash, Treasury bills/bonds and lending to credit institutions. Hoist Finance AB (publ) Interim report January June 17

18 Financial statements Parent Company income statement Full year Net sales 39,358 49,684 71,481 83, ,684 Other external expenses 38,672 49, ,587 79, ,509 Depreciation and amortisation 1,811 1,668 3,547 3,340 6,762 Total operating expenses 40,483 51, ,134 83, ,271 Operating profit 1,125 1,725 44, ,413 Other interest income 1, , ,254 Interest expense ,315 Total income from financial items 1, , Appropriations Profit/loss before tax 2,361 1,847 49, ,817 Income tax expense 2, , Profit/loss for the period 1) 427 1,939 38, ,464 1) Profit/loss for the period corresponds to comprehensive income for the period. Hoist Finance AB (publ) Interim report January June 18

19 Financial statements Parent Company balance sheet 30 Jun 31 Dec 30 Jun ASSETS Fixed assets Licences and software 36,337 31,871 28,650 Total intangible assets 36,337 31,871 28,650 Equipment 3,144 2,232 2,393 Total tangible assets 3,144 2,232 2,393 Shares and participations in subsidiaries 1,687, , ,997 Deferred tax assets 17,630 Total financial assets 1,705, , ,997 Total fixed assets 1,745, , ,040 Current assets Receivables, Group companies 5,880 47,506 59,532 Other receivables 1,413 4,353 5,348 Prepaid expenses and accrued income 6,504 17,174 1,561 Total current receivables 13,797 69,033 66,441 Cash and bank 32,721 43,519 15,428 Total current assets 46, ,552 81,869 Total assets 1,791,618 1,075, ,909 LIABILITIES AND SHAREHOLDERS EQUITY Shareholders' equity Restricted equity Share capital 26,178 21,662 17,207 Statutory reserve 3,098 3,098 3,098 Total restricted equity 29,276 24,760 20,305 Non-restricted equity Other contributed equity 1,661, , ,039 Retained earnings 18,775 28,062 28,062 Profit/loss for the period 38,927 12, Total non-restricted equity 1,604, , ,901 Total shareholders equity 1,633, , ,206 Untaxed reserves Provisions Pension provisions Total provisions Non-current liabilities Intra-Group loans 40,100 40,100 40,100 Total non-current liabilities 40,100 40,100 40,100 Current liabilities Accounts payable 8,913 9,856 3,342 Tax liabilities Liabilities, Group companies 106, ,535 83,111 Accrued expenses and prepaid income 1,077 2,773 12,820 Total current liabilities 117, ,517 99,377 Total liabilities and shareholders equity 1,791,618 1,075, ,909 Pledged assets none none none Commitments none none none Hoist Finance AB (publ) Interim report January June 19

20 Financial statements Parent Company statement of changes in shareholders equity Restricted equity Non-restricted equity Share capital Statutory reserve Other contributed equity Retained earnings Profit for the period Total shareholders' equity Opening balance 1 Jan 21,662 3, ,278 28,062 12, ,440 Transfer of previous year's net profit/loss 12,464 12,464 0 Comprehensive income for the period Profit for the period 38,927 38,927 Total comprehensive income for the period 38,927 38,927 Transactions reported directly in equity 1) New share issue 4, , ,061 Warrants, repurchased and cancelled 94 3,177 3,271 Tax effect on items reported directly in equity 7,155 7,155 Total transactions reported directly in equity 4, ,606 3, ,945 Closing balance 30 Jun 26,178 3,098 1,661,884 18,775 38,927 1,633,458 1) Nominal amount of SEK 778,068,000 was reduced by transaction costs of SEK 32,523,000. Restricted equity Non-restricted equity Share capital Statutory reserve Other contributed equity Retained earnings Profit for the period Total shareholders' equity Opening balance 1 Jan 15,488 3, ,830 23,111 4, ,354 Transfer of previous year's net profit/loss 4,951 4,951 0 Comprehensive income for the period Profit for the period 12,464 12,464 Total comprehensive income for the period 12,464 12,464 Transactions reported directly in equity 2) New share issue 6, , ,484 Paid-in premium for warrants 5,138 5,138 Total transactions reported directly in equity 6, , ,622 Closing balance 31 Dec 21,662 3, ,278 28,062 12, ,440 2) Nominal amount of SEK 527,160,000 was reduced by transaction costs of SEK 18,850,000. Restricted equity Non-restricted equity Share capital Statutory reserve Other contributed equity Retained earnings Profit for the period Total shareholders' equity Opening balance 1 Jan 15,488 3, ,830 23,111 4, ,354 Transfer of previous year's net profit/loss 4,951 4,951 0 Comprehensive income for the period Profit for the period Total comprehensive income for the period Transactions reported directly in equity 3) New share issue 1, , ,928 Total transactions reported directly in equity 1, , ,928 Closing balance 30 Jun 17,207 3, ,039 28, ,206 3) Nominal amount of SEK 331,244,000 was reduced by transaction costs of SEK 17,035,000. Hoist Finance AB (publ) Interim report January June 20