Intrum Ab · OMXSTO:INTRUM
Intrum Ab — Investor Day (December 2017)
113 slides from Intrum Ab's investor day presentation, Dec 7, 2017
Slide 1: Intrum 2020 Capital markets day
Intrum 2020 Capital markets day Stockholm 7th of December 2017
Slide 2: Disclaimer
Disclaimer Important Information This presentation is being made available on a strictly confidential basis, and all materials and information contained herein and information Matters discussed in this presentation may constitute forward-looking statements. Forward-looking statements are statements
Slide 3: Intrum's key messages for today
Intrum’s key messages for today Combination with Lindorff creates a European champion and delivers strong benefits Very large target market with many opportunities to grow Unique and sustainable competitive advantages Trusted preferred partner to our clients Strong financial profile augmented by syn
Slide 4: An experienced group management team
An experienced group management team Mikael Ericson Chief Executive Officer & President Group functions Regional managers Erik Forsberg Anders Engdahl Cathrine Klouman Johan Brodin Anne Louise Eberhard Anette Willumsen Per Christofferson Chief Financial Officer Chief Investment Officer Chief Operati
Slide 5: Today's agenda
Today’s agenda Time Topic Speaker 09:30–10:00 Registration 10:00–10:15 Welcome and introduction Mikael Ericson, CEO 10:15–10:45 Market outlook Anders Engdahl, CIO; Johan Brodin, CRO 10:45–11:15 Positioning and strategy Mikael Ericson, CEO 11:15-11:30 Coffee break 11:30–12:10 Growing Portfolio Invest
Slide 6: This is Intrum
This is Intrum Europe’s leading credit management company • Balanced business model with a holistic client Market leader service offering Top five • Diversification with local presence in 24 markets Other • Strong operational performance and consistent financial returns Intrum Key Metrics – LTM Sep’
Slide 7: Leading the way to a sound economy
Leading the way to a sound economy A sound economy • Creating value for our clients, our customers, our owners and for society at large • Helping companies of all sizes increase liquidity and minimise risk 7 © Intrum Justitia AB (publ) 2017. All rights reserved.
Slide 8: Intrum benefits from clear competitive advantages
Intrum benefits from clear competitive advantages Scale Greater relevance and operational efficiencies Diversification • Trusted preferred Access to multiple asset classes and industry verticals across 24 markets partner to clients Capabilities Full service offering across debt servicing and purchas
Slide 9: Strong business momentum
Strong business momentum 2017 development to date Combined group portfolio investments (SEKm) • Portfolio Investments – strong capital deployment at good returns ‒ Investment growth of +90% YTD, with good mix 4,986 across geographies and asset classes 2,629 2,880 ‒ Record-strong pipeline ‒ Market en
Slide 10: Strong business momentum
Strong business momentum Significant Q4 developments to date Portfolio Investments • Agreements to acquire a number of large debt portfolios for a total investment of EUR 200 million • Agreements to acquire debt portfolios with a forward flow structure for a total investment of about EUR 50 million
Slide 11: Integration on track
Integration on track • Detailed synergy implementation plans with clear ownership and tracking report Key • Already realised significant synergies integration deliverables • Rebranding process well underway to date • Joint IT infrastructure for Intrum • Organisational model being implemented 11 © In
Slide 12: Intrum 2020 – Committed to delivering strong shareholder value
Intrum 2020 – Committed to delivering strong shareholder value Financial targets for 2018-2020 ≥75% growth, 2020 vs 2016 EPS Growth EPS of SEK ≥35 in 2020 Portfolio ROI ≥13% p.a. Net Debt/Cash EBITDA Leverage 2.5x – 3.5x Dividend ≥50% pay-out ratio over time Note: See Appendix for detailed definitio
Slide 13: Table of contents
Table of contents Welcome and introduction Market outlook Positioning and strategy Strategic priorities: Growing Portfolio Investments and Credit Management Services Strategic priorities: Leading the way in digitalisation, driving operational excellence and delivering merger benefits Strategic prior
Slide 14: Strong market outlook and opportunity set
Market Outlook Strong market outlook and opportunity set Anders Engdahl, CIO
Slide 15: Strong market outlook and opportunity set
Strong market outlook and opportunity set 1 Expansion of our addressable market 2 Continued growth in credit and defaults 3 Mounting accounting and regulatory pressures 4 Widening of the sophistication and efficiency gap 5 Increasing outsourcing and debt sale levels 15 © Intrum Justitia AB (publ) 20
Slide 16: Expansion of our addressable market
1 Expansion of our addressable market Addressable segments represent ~6x Intrum’s historical core market Growth from large untapped market segments… …with Intrum’s strengthened capabilities Current footprint European stock of NPLs (€bn, % of total) – 2016E • Historical core focus of B2C All 24 marke
Slide 17: Continued growth in credit and defaults
2 Continued growth in credit and defaults • NPL and OTR stocks remain at record levels Loan book of selected Nordic speciality despite increase in debt sales finance lenders1 (€bn) ‒ Current stock in excess of €1 trillion • Strong growth in consumer finance lending, 7.9 particularly in the Nordics ‒
Slide 18: Mounting accounting and regulatory pressures
3 Mounting accounting and regulatory pressures NPL sale volumes expected to grow materially in the next few years • The total NPL stock in Europe is >2x higher than pre-crisis levels at ~€1trn vs €420bn NPL Sale – Two scenarios: Constant NPL ratio vs. return to pre-crisis NPL ratio • Collection outs
Slide 19: Widening of the sophistication and efficiency gap
4 Widening of the sophistication and efficiency gap Intrum creates significant value to credit originators Operational setup Non-core / cost center Mission critical / profit center • Collection systems and operations as Investments • Focus on front-end digitalisation for new origination a business p
Slide 20: Increasing outsourcing and debt sale levels
5 Increasing outsourcing and debt sale levels CMS outsourcing growth will mostly be captured by collection specialists like Intrum 70-80% of banks and experts surveyed expect an increase in outsourcing and debt levels Continued growth in credit and defaults Expert survey – % of participants expectin
Slide 21: Portfolio Investments return dynamics
Market outlook Portfolio Investments return dynamics Johan Brodin, CRO
Slide 22: Intrum operates in a healthy market
Intrum operates in a healthy market Returns remain highly attractive Combined group 180m GMM over life cycle • Stable returns over the cycle 2.6x 2.6x ‒ Supported by robust ongoing backbook performance 2.3x 2.3x 2.3x 2.2x 2.1x 2.2x 2.1x 1.9x • Key return trends supporting continued attractive risk-a
Slide 23: Return trend #1: Lower risk
1 Return trend #1: Lower risk Greater data and expertise generate less volatile returns Reduction in return volatility over time • >20 years of experience B2C unsecured portfolios – volatility in gross actual collections vs business case ‒ >4,500 portfolios SEKm Rolling LTM Standard Deviation ‒ >SEK
Slide 24: Return trend #2: Improved cost and collection efficiency
2 Return trend #2: Improved cost and collection efficiency Improvement in Collection Efficiency Over Time • Culture of continuous improvement 12.5% 8.7% • Resulting in greater cash flow and earnings 4.6% 5.0% 3.2% 2.4% • Targeted effort to improve efficiency ‒ Economies of scale 2012 2013 2014 2015
Slide 25: Return trend #3: Lower cost of capital
3 Return trend #3: Lower cost of capital Reduction in cost of capital – WACD1 and risk-free rate • Reduction in cost of capital in recent years Risk-free rate3 WACD ‒ More sophisticated industry ~5% ‒ Opening of international capital markets with 2.6% ~3% increasing understanding of the sector 0.3%
Slide 26: Our risk adjusted returns remain very attractive
Our risk adjusted returns remain very attractive Input Frontbook Frontbook Backbook Operating Cost of GMM Return Volatility Performance Costs % Capital Stronger Trend risk-adjusted over the last ROI and 3 years return to shareholders Excess Supporting Lower gross Greater excess Outcome Reduced risk
Slide 27: Generating sustainable high risk-adjusted returns
Generating sustainable high risk-adjusted returns Intrum is well positioned to compete and grow profitably Local and Pan-European scale Long-standing, reliable and trusted partner Relevance to small and large clients • Improved cost and collection More data, more experience efficiency Greater capita
Slide 28: Table of contents
Table of contents Welcome and introduction Market outlook Positioning and strategy Strategic priorities: Growing Portfolio Investments and Credit Management Services Strategic priorities: Leading the way in digitalisation, driving operational excellence and delivering merger benefits Strategic prior
Slide 29: Strong competitive position
Positioning and strategy Strong competitive position Mikael Ericson, CEO
Slide 30: A uniquely balanced and integrated business model
A uniquely balanced and integrated business model Strong complementarity and benefits Complementarity between Portfolio Investments and CMS… …resulting in clear synergies and tangible benefits • Full service offering to meet clients’ Flexibility evolving needs Origination • Preferred access to servi
Slide 31: Size and business model provide a unique position
Size and business model provide for a unique position for Intrum 70 % of Non-portfolio investments revenues 60 50 • The largest player 40 in Europe 30 • The greatest 20 geographical reach 10 • The most balanced 0 business model 1-5 5–15 15–25 Geographic reach (# of markets) Note: Bubble size represe
Slide 32: Intrum benefits from clear competitive advantages
Intrum benefits from clear competitive advantages Scale Greater relevance and operational efficiencies Diversification • Preferred partner Access to multiple asset classes and industry verticals across 24 markets to clients Capabilities Full service offering across debt servicing and purchasing • Si
Slide 33: Competitive strengths – Scale
Competitive strengths – Scale Market leader in Europe – Uniquely relevant to clients with scale benefits Largest European CMS Companies Revenues – LTM Sep-17 (SEKbn) 12.11 Cost efficiencies 6.81,2 3.3 Product and innovation investment capacity 3.2 ~SEK 15bn in available liquidity3 2.7 2.3 Lower cost
Slide 34: Competitive strengths – Diversification
Competitive strengths – Diversification Europe’s most diversified credit management company 2016 YTD Q3 2017 Vintage mix Industry mix Geographical mix across 24 countries ERC contribution (%) ERC contribution (%) Net revenue contribution (%) 2010 <2010 2017 Other 12% 6% 8% 10% Retail 2% 2011 Telecom
Slide 35: Competitive strengths – Capabilities
Competitive strengths – Capabilities Unique breadth of services and capabilities built over time Value add services Product expertise Solutions Information Invoice and Debt Debt Real estate BPO²/ services payment services purchase collection¹ services Carve-outs Co-investments Pan-European³ Peer 1 –
Slide 36: Competitive strengths – Robust risk management
Competitive strengths – Robust risk management Strong governance and risk controls embedded in culture and processes Risk appetite A well-established best practice Board of directors model with clear roles and External responsibilities regarding audit governance and risk Audit CEO management committ
Slide 37: Competitive strengths – Capital structure
Competitive strengths – Capital structure Intrum best placed to capture the market opportunity As of Sep-17 Leverage ~3.5x 3 3.3x 1.9x 2.9x 4.8x 4.2x 4.5x WACD1 ~3% ~2% ~5% ~8% ~7% ~6% ~4% ~15.0bn3 Available liquidity2 (SEbn) ~5.7bn ~3.5bn ~3.4bn ~2.6bn ~2.5bn ~1.3bn Intrum Peer 1 Peer 2 Peer 3 Peer
Slide 38: Unique client value proposition
Positioning and strategy Unique client value proposition Mikael Ericson, CEO
Slide 39: Intrum provides unique benefits to clients
Intrum provides unique benefits to clients One-stop-shop across the value chain Solution-oriented and flexible partner Ability to act cross-border Trusted and respected Capacity to take on large strategic projects (portfolios, BPOs) preferred partner Track record in structuring complex deals and cre
Slide 40: How Intrum adds value to TelCos
How Intrum adds value to TelCos Case study #1 – Significant value for clients Intrum’s role with the client Intrum’s positive impact on the client • Intrum creates value • Intrum have added significant value to through debt collection, the client through: Total economic benefit purchased debt and
Slide 41: How Intrum adds value to banks
How Intrum adds value to banks Case study #2 – Intrum’s unique BPO solutions allow clients to focus on core operations What we can do in a BPO Clear client benefits Intrum’s industry-leading track record • Long term partnership / contract Example – Relationship Bank for CMS • Bank’s collection busin
Slide 42: How Intrum adds value to customers
How Intrum adds value to customers Case study #3 – Sustainable collection performance and customer satisfaction Default rate by months since purchase in Country X 35% 30% 25% 20% • Increasing focus on affordable payment plans 15% • Resulting in lower default rates and greater 10% cash flow stability
Slide 43: A clear strategic plan
Positioning and strategy A clear strategic plan Mikael Ericson, CEO
Slide 44: Our strategy: To be the most innovative and profitable CMS company
Our strategy: To be the most innovative and profitable CMS company Vision To be trusted and respected by everyone that provides and receives credit Core purpose Leading the way to a sound economy Mission Help companies prosper by caring for their customers Values Empathy • Ethics • Dedication • Solu
Slide 45: 2020 strategic plan
2020 strategic plan Strategic priorities Status today Ambition 2020 1 • SEK 19bn (as of Q3 -17) Portfolio Investments book with vast • At least SEK 30bn Portfolio Investments book with sizable Growing Portfolio majority from consumer unsecured contribution from SME and mortgages Investments • Presen
Slide 46: Table of contents
Table of contents Welcome and introduction Market outlook Positioning and strategy Strategic priorities: Growing Portfolio Investments and Credit Management Services Strategic priorities: Leading the way in digitalisation, driving operational excellence and delivering merger benefits Strategic prior
Slide 47: Growing Portfolio Investments
Strategic priorities Growing Portfolio Investments Anders Engdahl, CIO
Slide 48: A world class Portfolio Investments business
A world class Portfolio Investments business Continued growth for combined group in Portfolio Investments book value • Better capabilities and data Book value of purchased debt (SEKbn) 19.1 • Capital deployment opportunities in 24 markets 16.3 • Diversified portfolio across vintages, geographies 13.
Slide 49: Record-strong pipeline across geographies and asset classes
Record-strong pipeline across geographies and asset classes Continued capabilities allow Intrum …Supporting capital deployment at …Thereby growing pipeline and… to address larger market… attractive returns across asset classes Value of transactions by loan type Capex (€bn) (Face value, € bn, % of to
Slide 50: Significant room to expand within the consumer unsecured segment
Significant room to expand within the consumer unsecured segment 1 Strong tailwinds 2 Gain scale in markets 3 Grow through 4 Enter new from market growth where not a leader transactions markets • Growth in consumer lending • Scope for significant market • Buy-out of backbook with • Strong historical
Slide 51: Expanding in B2C secured and SME – Intrum's capabilities
Expanding in B2C secured and SME – Intrum’s capabilities Intrum has access to supply in the market… …and has the platform and capabilities to acquire profitably • Strong liquidity and investment capacity • Present in B2C secured and B2C SME in 8 markets Flexibility • Ability to invest across several
Slide 52: Expanding in B2C secured and SME – Roll-out plan
Expanding in B2C secured and SME – Roll-out plan 2020 Existing • Systematic expansion experience and capabilities • Continue to develop operational capabilities Sizable contribution to the group’s Portfolio Investments growth • Pro-active entry into segment via greenfield Priority markets operations
Slide 53: Case study - Co-investment in mixed portfolio
Expanding within secured and SME Case study - Co-investment in mixed portfolio Transaction in brief – Q4-15 Intrum’s involvement in the process Process stages Parties Comments • Intrum, together with three co-investors, successfully closed a ~€370m face value mixed portfolio acquisition NBO • Intrum
Slide 54: Growing Credit Management Services
Strategic priorities Growing Credit Management Services Anne Louise Eberhard, CCO
Slide 55: Multiple sources of CMS growth in a changing market
Multiple sources of CMS growth in a changing market Combined group growth track record (SEKbn) Intrum 2020 growth ambitions 2.5 8.8 •1 Organic growth through Xpand programme ~50% 0.7 (0.2) 5.8 •2 Broad products and services focus with BPOs and Portfolio Investments to match clients’ needs •3 Targete
Slide 56: Organic growth – Xpand: Our commercial excellence programme
1 Organic growth – Xpand: Our commercial excellence programme Xpand programme Last years’ effort paying off Annual CMS organic growth ~1-2% • More integrated and sales-driven approach, driving organic growth • Holistic client service offering across all products • Build a new common sales and perfor
Slide 57: Servicing, BPOs and investments go hand-in-hand
1 Organic growth – Servicing, BPOs and investments go hand-in-hand in the client dialogue Example of a bank client’s strategic review of NPL management The Client’s priorities and value creating KPIs The strategic client dialogue • Balance sheet management and NPL • NPL review and segmentation provi
Slide 58: BPO contracts – Our track record
2 BPO contracts – Our track record Intrum has an unparalleled BPO track record • Allows client to focus on core activities Strong market opportunity • Stronger solution rates and retained control driven by • Positive financial debtor impact client benefits • Better customer experience >12 BPOs compl
Slide 59: BPO contracts – Case study
2 BPO contracts – Case study Long term value creation of a successful BPO solution Background Clear transaction benefits for Intrum • A subsidiary of a major European bank • Responsible for late collection of retail, mortgage and corporate / SME New asset • Broaden asset classes to secured, real rec
Slide 60: Targeted M&A to increase our relevance with clients
3 Targeted M&A to increase our relevance with clients Mature markets Build value proposition Build partnerships Support customer journey Market maturity Expand core competencies Drive specialisation New/immature markets Build scale Increase scale Expand geographic footprint Develop geographic footpr
Slide 61: M&A – Strong track record and solid pipeline of opportunities
3 M&A – Strong track record and solid pipeline of opportunities Characteristics of Intrum is uniquely positioned Intrum has a stable and diversified the CMS market to create value from M&A M&A track-record • Fragmented market • Develop competence, knowledge Intrum has acquired 12 companies and techn
Slide 62: M&A – Case study
3 M&A – Case study Successful integration and value creation • Acquisition of a company with strong expertise in B2B Strong integration benefits collection services – Considered non-core by the seller Cost synergies realised 18% of cost base – High IT running costs due to under-investments • Key rat
Slide 63: Table of contents
Table of contents Welcome and introduction Market outlook Positioning and strategy Strategic priorities: Growing Portfolio Investments and Credit Management Services Strategic priorities: Leading the way in digitalisation, driving operational excellence and delivering merger benefits Strategic prior
Slide 64: Leading the way in digitalisation & data analytics
Strategic priorities Leading the way in digitalisation & data analytics Cathrine Klouman, COO
Slide 65: Digitalisation and data analytics enable performance enhancement
Digitalisation and data analytics enable performance enhancement New revenue streams and efficiency improvements • Size creates scale advantage • Efficient and effective operation source for increased competitiveness Effectiveness & Growth efficiency • Core enabler for • New innovative improvements
Slide 66: Four key areas, changing Intrum's day-to-day business
Four key areas, changing Intrum’s day-to-day business 1 Digital user 2 New products 3 Automated 4 Data & analytics experience and services business processes driven collections • Self-service portals for • Traditional business • Automation • Centralised customers and clients models for delivering le
Slide 67: We are investing in digitalisation, automation & data analytics
We are investing in digitalisation, automation & data analytics Strengthening our competitive advantages Key initiatives Ambition 2020 Investments 2018-20 • Improve client and customer channels, with Digital user self-service & API´s experience >30% of • Implement digital payments as global service
Slide 68: Case study – Artificial Intelligence
Significant user experience and process improvements Case study – Artificial Intelligence Case study: Benefits AI / Virtual assistant • Automating customer service (invoice) • Improved customer experience: • White-label solution built in collaboration ‒ One contact point for the customer with a Norw
Slide 69: Chatbot demonstration
Significant user experience and process improvements Chatbot demonstration Excerpt from client website “Wondering about something? Ask our new chatbot about your invoice” 69
Slide 70: Persona-based customer segmentation bringing tangible benefits
Persona-based customer segmentation bringing tangible benefits Case study - Personas The Occasional The Calculator The Low Salary The Occasional 39% 3% 17% 39% The One-Timer The Rich The Rescue 17% 3% 4% The Young 4% • A detailed database of historical case • Advanced analytics • Actions tailored to
Slide 71: Roll-out strategy: centralised approach with local ownership
Roll-out strategy: centralised approach with local ownership Transforming the business for growth Dedicated core team Speedy piloting Global roll-out • Group product ownership • Pilot in high-potential countries • Strong leadership to drive change • Cross-functional teams • Trial & error culture • L
Slide 72: Driving operational excellence
Strategic priorities Driving operational excellence Cathrine Klouman, COO
Slide 73: Operational excellence
Operational excellence Doing the right things and doing things right Operational High excellence Focus on doingin our core Operational the right things, butbusiness excellence they are costly to in our core execute business 1 Effectiveness – Doing the right activity at the right time for the right c
Slide 74: Four key operational levers maximising business value
Four key operational levers maximising business value 1 2 3 4 Best practice Exploit shared IT effectiveness Sourcing and and operational services and scale and efficiency procurement performance opportunities management • Multi-location SSC in • Dual IT infrastructure • Mainly local sourcing • Varia
Slide 75: Well-defined activity-based agenda and operational improvement targets
Well-defined activity-based agenda and clear operational improvement targets Key initiatives Ambition 2020 1 • Scale up current services in more countries Shared Service >10% • Transition new areas with scale potential Center (SSC) of group employees in SSC • Further develop centers of excellence 2
Slide 76: Best practice: Operational improvements with significant financial impact
Best practice: Operational improvements with significant financial impact Case study Bank Portfolio X in Country Y 1 Mid ’15: Approximate time where YTD: Improvement performance improvements were initiated to date 2 Early ’16: Point in time where 3 Collections effects were starting to show Total Col
Slide 77: Best-in-class operational excellence
Best-in-class operational excellence In summary Drive group-wide efforts to identify and capitalise on opportunities for scale and efficiency Drive best practice sharing to improve business performance Ensure stable and secure operations in a fast-paced market 77 © Intrum Justitia AB (publ) 2017. Al
Slide 78: Delivering merger benefits
Strategic priorities Delivering merger benefits Harry Vranjes, Head of Project Management Office
Slide 79: Integration update
Integration update Progress according to plan • Detailed synergy implementation plans with clear ownership and tracking report Key integration • Already taken out significant synergies deliverables • Rebranding process well underway to date • Joint IT infrastructure for Intrum • Organisational model
Slide 80: Focus on securing synergy realisation
Focus on securing synergy realisation Clear ownership, accountability and detailed tracking tool Clear integration ownership Rigorous tracking and and governance structure follow-up routines • Dedicated Program Management Officer 1 • Progress tracking through detailed milestone plans • Weekly update
Slide 81: Targeted cost synergies have been identified in detail
Targeted cost synergies have been identified in detail Savings realisation is well underway Sources of cost synergies (run rate) Timeline for cost synergy realisation and associated one-off costs Other Group 14% functions Annualised (SEKm) FC Q4 '17 FC Q4 '18 FC Q4 '19 SEK 80m 22% SEK 125m End of ye
Slide 82: Cost synergy implementation in one of our countries
Cost synergy implementation in one of our countries Case study • Targeted lease contracts have been exited, Reducing 40% reduction in premises cost currently planning office move base by decreasing number of office footprint • Negotiated with landlord to increase office offices to half space in rema
Slide 83: Upside from identified revenue synergies
Upside from identified revenue synergies • Greater access to data Larger data det • Improved collections and pricing of portfolios • More effective collection strategies Significant Complementary mid-term • Adding / expanding certain of Intrum Justitia’s products and potential services to previous L
Slide 84: Table of contents
Table of contents Welcome and introduction Market outlook Positioning and strategy Strategic priorities: Growing Portfolio Investments and Credit Management Services Strategic priorities: Leading the way in digitalisation, driving operational excellence and delivering merger benefits Strategic prior
Slide 85: Regional perspectives
Strategic priorities Regional perspectives Anette Willumsen, MD Northern Europe Per Christofferson, MD Central & Eastern Europe Marc Knothe, MD Western & Southern Europe Alejandro Zurbano, MD Spain
Slide 86: Northern Europe – Overview
Northern Europe – Overview Denmark, Estonia, Finland, Latvia, Lithuania, Norway, Sweden Northern Europe – Key figures (excl revaluations, NRIs) SEKm Jan-Sep’17 Jan-Sep’16 Change% 32% of Group revenues1 Revenues 2,894 2,756 +5% EBIT 1,102 1,085 +2% EBIT margin 38% 39% -1ppt Key trends and growth driv
Slide 87: Northern Europe – Priorities for growth
Northern Europe – Priorities for growth Denmark, Estonia, Finland, Latvia, Lithuania, Norway, Sweden Strategic priorities Status today Ambition 2020 1 Growing Portfolio • Strong position in mature and sophisticated market • Sustain and grow current high investment levels Investments • Preferred part
Slide 88: Central & Eastern Europe – Overview
Central & Eastern Europe – Overview Austria, Czech Republic, Germany, Greece, Hungary, Poland, Romania, Slovakia and Switzerland Central & Eastern Europe – Key figures (excl revaluations, NRIs) SEKm Jan-Sep’17 Jan-Sep’16 Change% 27% of Group revenues1 Revenues 2,389 1,941 +23% EBIT 865 688 +26% EBIT
Slide 89: Central & Eastern Europe – Priorities for growth
Central & Eastern Europe – Priorities for growth Austria, Czech Republic, Germany, Greece, Hungary, Poland, Romania, Slovakia and Switzerland Strategic priorities Status today Ambition 2020 1 Growing Portfolio • #1 in many markets, not in all industries • #1 in more markets and industries Investment
Slide 90: Western & Southern Europe – Overview
Western & Southern Europe – Overview Belgium, France, Ireland, Italy, the Netherlands, Portugal, United Kingdom Western & Southern Europe – Key figures (excl revaluations, NRIs) SEKm Jan-Sep’17 Jan-Sep’16 Change% 19% of Group revenues1 Revenues 1,713 1,427 +20% EBIT 322 287 +12% EBIT margin 19% 20%
Slide 91: Western & Southern Europe – Priorities for growth
Western & Southern Europe – Priorities for growth Belgium, France, Ireland, Italy, the Netherlands, Portugal, United Kingdom Strategic priorities Status today Ambition 2020 1 • Grow annual investments in (un)secured portfolios while Growing Portfolio • Strong position in unsecured in all markets mai
Slide 92: Spain – Overview
Spain – Overview Spain – Key figures (excl revaluations, NRIs) SEKm Jan-Sep’17 Jan-Sep’16 Change% 22% of Group revenues2 Revenues 2,016 1,293 +56% EBIT 632 108 +485% EBIT margin 31% 8% +23ppt Key trends and growth drivers • Availability of large volumes of NPL and REO3 • The economic recovery is boo
Slide 93: Spain – Priorities for growth
Spain – Priorities for growth Strategic priorities Status today Ambition 2020 1 • Maintain position in unsecured NPL market Growing Portfolio • Leading player in unsecured NPL market • Increased contribution from SMEs in portfolio sales Investments • First portfolio acquired in the secured NPL marke
Slide 94: Table of contents
Table of contents Welcome and introduction Market outlook Positioning and strategy Strategic priorities: Growing Portfolio Investments and Credit Management Services Strategic priorities: Leading the way in digitalisation, driving operational excellence and delivering merger benefits Strategic prior
Slide 95: Financial review
Financial review Erik Forsberg, CFO
Slide 96: Strong momentum in group performance (pro forma)
Strong momentum in group performance (pro forma) Credit Management 9,118 Financial Services 7,475 3,379 4,100 +22% Revenue YoY growth (SEKm) in combined 5,019 4,097 group revenues 9M 2016 9M 2017 3,025 2,226 +36% EBIT YoY growth excl. NRIs (SEKm) in combined group EBIT 9M 2016 9M 2017 1 Excluding NR
Slide 97: Solid growth across business lines
Solid growth across business lines YoY Growth +32% +26% +10% External CMS Internal CMS 2,153 2,292 2,155 On track to 549 deliver solid CMS revenue 505 527 internal and growth 1,743 external CMS 1,648 1,628 growth Q1'17 Q2'17 Q3'17 6,987 7,336 6,634 +5% growth Rolling 12M portfolio in LTM investments
Slide 98: Track record of delivery on historical financial targets
Track record of delivery on historical financial targets Pre-merger Intrum Justitia financial targets (May 2013) History of achieving financial targets EPS growth ≥10% p.a. ROI ≥15% p.a. Leverage1 2.0–3.0x Pay-out 56% 52% 52% 45% ratio 50% pay-out 8.3 9.0 Dividend 5.8 7.0 ratio over time DPS 2013 20
Slide 99: Successful disposal of business units
Successful disposal of business units Divestment agreement in line with commitments made to the European Commission Use of sale proceeds – Priorities • Divestment of Lindorff’s businesses in Denmark, Estonia, Finland and Sweden as well as Intrum Justitia’s business in Norway 1 Portfolio investments
Slide 100: Intrum 2020 – Committed to deliver strong shareholder value
Intrum 2020 – Committed to deliver strong shareholder value Financial targets for 2018-2020 Financial targets Key rationale for selection of target ≥75% growth • Central driver for shareholder value creation – highly correlated with total shareholder returns EPS growth 2020 vs 2016 • Implied average
Slide 101: Financial targets for 2018-2020
Financial targets for 2018-2020 Key drivers for achieving our EPS growth target • Book value to grow to at least SEK 30bn by 2020 Portfolio Investments • Main growth driver will be new asset classes, supported by new market entries • Positive organic growth • Revenues from servicing of own portfolio
Slide 102: Financial targets for 2018-2020
Financial targets for 2018-2020 Key drivers for achieving our portfolio ROI target • Robust ongoing performance Backbook ROI • Continued benefits from cash collections beyond our initial forecast horizon • Stabilising pricing environment with returns reflecting competitive Frontbook ROI but healthy
Slide 103: Financial targets for 2018–2020 – leverage
Financial targets for 2018–2020 Key drivers for achieving our leverage target Q3’17 PF Leverage 1 (incl. RemCo proceeds) ~3.5x Indicative cash-flow profile based on adjusted Q3-17 LTM data (SEKbn) 7.9 (0.8) ~0.3x impact on (0.5) (0.2) ~(4.0) Net Debt/Cash Strong cash flow EBITDA generation from bala
Slide 104: Dividend policy
Dividend policy • “Intrum’s Board of Directors intends to annually propose a dividend or its equivalent to shareholders that over time averages at least half of the net earnings for the year after tax. Decisions relating to dividend proposals will take into account estimates of future revenue growth
Slide 105: Additional financial information
Additional financial information
Slide 106: New disclosures
New disclosures Text/Values in italics represent new disclosures to be provided on quarterly basis Intrum Pro-forma excluding RemCo units 2017 Q1 Q2 Q3 Total depreciation and amortisation (excl. PD Amortisation), SEKm 164 223 162 of which, amortisation on client relationships from BPOs and acquisiti
Slide 107: Accounting
Accounting Amortisation policy and historic development Portfolio amortisation as a % of portfolio collections1 • The amortisation amount for a portfolio is the difference in the 47% 46% asset value of the portfolio between the start and end of any 44% 41% 40% 38% given period. The asset value is ca
Slide 108: Table of contents
Table of contents Welcome and introduction Market outlook Positioning and strategy Strategic priorities: Growing Portfolio Investments and Credit Management Services Strategic priorities: Leading the way in digitalisation, driving operational excellence and delivering merger benefits Strategic prior
Slide 109: Concluding remarks
Concluding remarks Mikael Ericson, CEO
Slide 110: A European champion positioned to deliver shareholder value
A European champion positioned to deliver shareholder value Very large target market with many opportunities to grow Unique and sustainable competitive advantages Trusted preferred partner to our clients Strong financial profile augmented by synergy realisation Committed to deliver strong long-term
Slide 111: Appendix
Appendix
Slide 112: New financial targets – Detailed definitions
New financial targets Detailed definitions • ROI (measured on LTM basis) Portfolio service line earnings in given period divided by Average book value of purchased debt portfolios in the given period Average book value is a linear average: ingoing balance + outgoing balance, divided by two • EPS (Ea
Slide 113: Slide 113