Interim report January - March 2015

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Interim report January - March 2015

April 22

^th

2015

Lars Wollung, CEO

Erik Forsberg, CFO

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Q1 Key highlights

• Strong financial performance

‒ EBIT excluding revaluations and fx-impact +12%

• Investment grade rating from Standard & Poor’s

• Improving market position

‒ Acquired units in Czech Republic, Denmark and France performing well

• Development of new services

‒ E-com offering launched in Nordic and Switzerland

• Operational excellence program delivering according to plan

• Continued focus on improving our consumer-friendly collection practices

‒ Approximate 50 000 calls every day, to find optimal solutions for creditor and debtors

‒ E.g. in Sweden only, we agree on some 75 000 payment plans per year

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Q1 Key financials

12% EBIT growth (adjusted for currency and debt portfolio revaluations)

34% RTM EPS growth

-9% Growth in operating cash flow

19% Return on purchased debt

469 MSEK investments in purchased debt

12% Growth in purchased debt book value

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Financial summary

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* Excluding items affecting comparability is -35 MSEK for Q4 2014

** EBITDA = operating result before interest, taxes, depreciation on tangible and intangible fixed assets as well as amortization and revaluation of purchased debt

Q1 Q1 FY

2015 2014 2014

Revenues, MSEK 1 370 1 204 14 5 184

EBIT, MSEK 339 283 20 1 465 *

EBIT margin, % 25 24 n/a 28

EPS growth, % 39 21 n/a 31

Cash flow from operations, MSEK 483 530 -9 2 672

Investments in purchased debt, MSEK 469 619 -24 1 937

Return on purchased debt, % 19 19 n/a 20

Purchased debt book value, MSEK 6 338 5 656 12 6 197

Net debt to RTM EBITDA** 1.89 1.68 1.88

Change

%

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Regional development

Northern Europe

47 percent of total revenues

• Revenue growth excluding revaluations and fx-impact up 6% year-on-year,

mainly from the acquisition of Advis A/S and organic growth from CMS

• Improved EBIT and EBIT margin mainly due to CMS revenue growth and improved cost efficiency, as well as improving results from the region’s IJ Finance units

• Launch of Avarda, a joint venture with TF Bank, offering payment services for e-merchants in the Nordics

Q1 Highlights

Market leader Top five Other

Q1 Q1 Change Fx Adj

Excl. PD Revaluations, Quarter 2015 2014 % %

Revenues, SEKm 651 590 10% 6%

EBIT, SEKm 182 144 26% 22%

EBIT margin % 28% 24% 4 ppt

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• Continued good revenue and EBIT growth, with improvements from both PD and CMS

• Solid development from last year’s acquisition of the leading PD

company in the Czech Republic

• Launch of new payment and

financing service for e-merchants in Switzerland

• Significant positive fx-impact from appreciation of CHF/SEK.

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Regional development

Central Europe

30 percent of total revenues

Q1 Highlights

EBIT, SEKm 125 95 32% 18%

EBIT margin % 30% 28% 2 ppt

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Regional development

Western Europe

23 percent of total revenues

• Significant negative EBIT-impact from one-off costs associated with change of Regional Managing Director

• Improved earnings from PD but

negative year-on-year trend for CMS

• Strong focus on driving improved growth going forward, through strengthening organizational resources and growing PD investment levels

Q1 Highlights

EBIT, SEKm 39 54 -28% -32%

EBIT margin % 12% 19% -7 ppt

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Credit Management Services 64 percent of total revenues

Q1 Highlights

• Revenue growth excluding currency impact at +4%, mainly from the acquisition of Advis

• Marginally positive organic growth from external clients

• Strong YoY increase in Service Line Earnings, driven by positive effects from acquisitions, organic growth and improved cost efficiency. Note also that that the comparison period in 2014 was relatively weak.

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Reported numbers, Quarter 2015 2014 % %

Revenues, SEKm 1 002 908 10% 4%

Service line earnings, SEKm 237 178 33% 25%

Service line earnings margin % 24% 20% 4 ppt

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Financial Services

36 percent of total revenues

• PD Book Value growth of 12% (6% fx- adjusted) driving increased Service Line Earnings growth.

• Strong RoI at 19%, in line with the same period last year.

• PD investment levels reflecting market situation with generally good supply but significant price competition in several markets.

Q1 Highlights

Reported numbers, Quarter 2015 2014 % %

Service line earnings, SEKm 308 264 17% 9%

Service line earnings margin % 54% 54% 0 ppt

Investments in PD, SEKm 469 619 -24%

ROI 19% 19% 0 ppt

PD Book Value closing balance 6 338 5 656 12%

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24% 3%

36%

26%

33%

15% 12%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0 1 000 2 000 3 000 4 000 5 000 6 000

2008 2009 2010 2011 2012 2013 2014 2015

PD Book value & growth

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SEK M

PD carrying value:

SEK 6 338 M

Book Value growth: 12%

PD carrying value % Growth YoY

Q1 Y o Y comparison

-1%

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Purchased debt, investments & ROI

2008–2014

872 871 1050

1804 2014

2475

619 469 574

267 477

0%

5%

10%

15%

20%

25%

0 500 1 000 1 500 2 000 2 500

2008 2009 2010 2011 2012 2013 2014 2015

266 SEK M

Q1 Q2 Q3 Q4 FY

1 937 KSEK PD ROI RTM excl revaluation

1) 2008 – 2013 paid investments 2) 2014 – 2015 booked investments

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Purchased debt - revaluations

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Q1 Q1

PD revaluations, SEK m 2015 2014

Northern Europe -33 -12

Central Europe 18 2

Western Europe 8 0

Total -7 -10

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Balance sheet – Highlights

31 Mar 31 Mar Dev

SEK m 2015 2014 %

Intangible fixed assets 3 031 2 796 8

- whereof goodwill 2 763 2 542 9

Tangible fixed assets 123 110 12

Financial fixed assets 6 392 5 736 11

- whereof purchased debt 6 338 5 656 12

Current assets 2 012 1 830 10

Total assets 11 558 10 472 10

Shareholders' equity 3 179 3 275 -3

Long-term liabilities 5 644 4 925 15

Current liabilities 2 735 2 272 20

Total shareholders equity and liabilities 11 558 10 472 10

Net Debt 5 775 4 664 24

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Cash flow statement

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Q1 Q1 Dev FY

SEK m 2015 2014 % 2014

Operating earnings (EBIT) 339 283 20 1 430

Depreciation 41 38 8 170

Amortization and revaluation of purchased debt 367 360 2 1 395

Income tax paid -140 -45 211 -138

Changes in factoring receivables -20 -1 n/a -38

Other changes in working capital -45 -41 10 60

Financial net & other non-cash items -59 -64 -8 -207

Cash flow from operating activities (CFFO) 483 530 -9 2 672

Purchases of tangible and intangible fixed assets (CAPEX) -31 -28 11 -142

Purchases of debt -478 -688 -31 -1 950

Acquisitions and other cash flow from investing activities -37 24 n/a -158

Cash flow from investing activities (CFFI) -546 -692 -21 -2 250

Free cash flow (CFFO - CFFI) -63 -162 -61 422

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Funding base

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

‒ About SEK 1,9 bn utilized per Mar 2015

‒ 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 0,7 bn outstanding per Mar 2015

• Co-Investors – for large portfolios of receivables

‒ Typically participate by 50-75% of total investment

0 500 1000 1500 2000 2500 3000 3500

2015 2016 2017 2018 2019 Debt Maturity Schedule

(SEK million)

Commercial Paper Bank Loan Bonds

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Financial targets

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Financial targets Q1 15 Q1 15 RTM FY 2014

1. EPS growth to exceed 10% per year 39% 34% 31%

2. Return on PD investments to exceed 15% per year 19% 20% 20%

3. Net Debt/EBITDA should be between 2.0 and 3.0 1.89 1.89 1.88

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Q&A

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Appendix

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This is Intrum Justitia

Delivering consistent, strong financial returns Proven hybrid business model serving the full credit management value chain

European market leader in an attractive growth market

Diversification of risk through broad base of clients, sources and countries

2014 2013

Revenue 5 184 4 566

EBIT 1 430 1 207

# Average Nr

of Employees 3 801 3 530

Market leader Top five

Other

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0 5 10 15 20 25 30

0 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 4 500 5 000 5 500

2008 2009 2010 2011 2012 2013 2014 2015

Revenues EBIT

EBIT-margin (RHS)

Revenues and EBIT margin, rolling 12 months

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% Revenues: SEK 5 350 M

EBIT margin: 28%

SEK M

Q1

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Gross Collections vs. Active Forecast - R12

0%

2%

4%

6%

8%

10%

Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414 Q115

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Indicative Financial illustration

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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

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

Investments

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A broad indication going forward

Carrying value 31 Mar 2015: SEK 6,338 M +12% y-o-y (SEK 5,656 M)

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Gross collection: Carrying value x 2.05

Cash flow distribution 31 Mar

of Gross collection 2015 2014

Y1 25% 23%

Y2 16% 17%

Y3 13% 13%

Y4 10% 11%

Y5 10% 9%

Y6 7% 7%

Y7 6% 6%

Y8 5% 5%

Y9 3% 4%

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