Fourth quarter 2017
- Consolidated net revenues for the fourth quarter of 2017 amounted to SEK 3,101 M (1,658). Pro forma for the fourth quarter of 2016, net sales were SEK 3,028 M.
- Operating earnings amounted to SEK 807 M (542). Pro forma for the fourth quarter of 2016, operating earnings were SEK 958 million.
- The operating earnings of SEK 807 M include non-recurring items of SEK –157 M (pro forma in the preceding year, SEK –42 M) and revaluations of SEK –44 M (pro forma in the preceding year, SEK –1 M). Accordingly, operating earnings excluding non-recurring items and revaluations amounted to SEK 1,008 M (pro forma in the preceding year, 1,001).
- Net earnings for the quarter amounted to SEK 443 M (429) and earnings per share were SEK 3.37 (5.90).
- Cash flow from operating activities amounted to SEK 1,296 M (1,093).
- The reported value of portfolio investments has increased by 29 percent on a pro forma basis compared with the fourth quarter of 2016. Portfolio investments for the quarter amounted to SEK 2,784 M (pro forma in the preceding year, 2,350). The return on portfolio investments excluding non-recurring items was 15 percent (pro forma in the preceding year, 16 percent).
- On a pro forma basis, the quarter’s net revenues for the Credit Management service line were unchanged compared with the corresponding quarter in the preceding year, with a service line margin excluding non-recurring items of 27 percent (pro forma in the preceding year, 32 percent).
- There was strong growth in investments in the quarter, with total acquisitions and portfolio investments of around SEK 4 billion.
- Lindorff’s operations in Denmark, Estonia, Finland and Sweden, and Intrum Justitia’s operations in Norway divested at attractive valuations.
- A market leading position was established on the important Italian market.
- The integration process proceeds well with realized cost synergies of around SEK 200 M annually at the end of the fourth quarter.
- The strategy for 2018-2020 was presented at the Capital markets day with clear activities and priorities underpinning new financial targets, including an EPS growth of 75 percent from 2016 to 2020.
- The Board of Directors proposes a dividend of SEK 9.50 (9.00) per share, corresponding to a total of SEK 1,250 M (651).
- Consolidated net revenues for 2017 amounted to SEK 9,434 M (5,869). Pro forma, net sales amounted to SEK 12,219 M (10,503).
- Operating earnings amounted to SEK 2,728 M (1,921). Pro forma, operating earnings amounted to SEK 3,489 M (3,055).
- Pro forma operating earnings of SEK 3,489 M include non-recurring items of SEK –499 M (pro forma in the preceding year SEK –171 M), items affecting comparability of SEK 25 M (pro forma in the preceding year SEK –285 M) and revaluations of SEK 63 M (pro forma in the preceding year, 57). Operating earnings excluding non-recurring items, items affecting comparability and revaluations amounted to SEK 3,900 M (pro forma in the preceding year, 3,454).
- Net earnings amounted to SEK 1,503 M (1,468) and earnings per share were SEK 14.62 (20.15).
- Cash flow from operating activities amounted to SEK 4,535 M (3,304).
- On a pro forma basis, the carrying amount of portfolio investments increased by 29 percent against 2016. Pro forma, the year’s portfolio investments amounted to SEK 7,804 M (pro forma in the preceding year, 4,979). The return on portfolio investments excluding non-recurring items was 16 percent (pro forma in the preceding year, 16 percent).
- The year’s net revenues for the Credit Management service line increased on a pro forma basis by 16 percent compared with the preceding year, with a service line margin excluding non-recurring items of 28 percent (pro forma in the preceding year, 27 percent).
- Intrum was established as the market leader in Europe through the merger with Lindorff, with a very competitive scale and reach on 24 markets. The merger has been successfully implemented in the year, including a refinancing of the new Group on very good terms, divestment of subsidiaries as required by the EU commission at an attractive valuation and launch of a new trademark and corporate identity. High pace and good quality of the integration work to realize the significant cost synergies made possible through the merger.
- Intrum entered three new markets in the year through acquisitions – the United Kingdom, Romaina and Greece. Furthermore, a market leading position was achieved in Italy through a large complementary acquisition.
- Continued good market conditions with a considerable supply of investment portfolios and opportunities for acquisitions in CMS.
Comment by President and CEO Mikael Ericson
For Intrum, 2017 was a transformative year, characterized by high activity and significant change, in which we established the company as the undisputed market leader in Europe. During the year, we completed the merger with Lindorff, thereby establishing a competitive position with an unprecedented scale and reach encompassing 24 markets, and with a uniquely balanced business model. Following the approval of the merger in June, we successfully accomplished several key milestones for the new group in the second half of the year, including refinancing the new group at a market-leading interest level and divesting certain subsidiaries at an attractive valuation. We have also introduced a new brand and corporate identity to connect and bond our employees, to strengthen the new group’s common culture and to build connections with our clients. We have also appointed all of the senior executives for the new group, and they are working with great professionalism to ensure that the integration process progresses effectively.
In the fourth quarter of 2017, we had very good activity in several of our markets. There remains a high supply of purchased debt and there is also good potential for value-generating acquisitions in credit management services. During the quarter, we established ourselves as a market leader in the important Italian market and we made our first portfolio investment in Greece. Our investment rate in the fourth quarter was the highest to date, with total acquisitions and portfolio investments of approximately SEK 4 billion. At the same time, we are seeing positive results from the integration process, having already realized cost synergies, at an annual rate of about SEK 200 M towards the end of the fourth quarter.
Our financial development in 2017 altogether was favorable and in accordance with plan. Pro forma for the acquisition of Lindorff and divested units, the Group’s revenues increased by 16 percent and underlying operating earnings increased by 13 percent compared with 2016. For the fourth quarter, our operating earnings, excluding revaluations and non-recurring items, were slightly higher than in the corresponding period in the preceding year. Purchased debt had a very strong growth in terms of book value and return, while credit management services reported lower margins compared to last year. Our assessment is that we have significant potential to increase both growth and margins for our service operations over the coming years, primarily through cost synergies, increased efficiency and acquisitions.
We also continued our efforts to lead the way towards a sound economy in Europe. During the quarter, we published the European Consumer Payment Report, highlighting European consumers’ views on their private economy and capacity to lead a debt-free existence. The year’s report reveals how many young parents are pressured to consume beyond their assets, driven by social media, e-commerce and easily accessible credit. We also continue to pursue matters involving educational needs, primarily among young consumers, with regard to private finances.
In December, we presented Intrum’s strategy for the next three years, with clear priorities and goals for growth, digitization, efficiency and synergies for Lindorff from the merger. The strategy and its priorities form the starting point for our new financial targets, in which we have a well-defined plan for how to increase earnings per share by at least 75 percent by 2020 compared with 2016. After a year partly characterized by management of the merger, we now begin 2018 with even larger opportunities to work in a close partnership with our clients. With our strong competitive position and strategic plan, we have a solid platform for continued strong value generation for our clients, shareholders and employees. Accordingly, I am looking forward with confidence to strong growth for Intrum over the coming years.
The Board of Directors of Intrum Justitia AB proposes that the Annual General Meeting distribute a dividend to the shareholders of SEK 9.50 per share (9.00), corresponding to a total of SEK 1,250 M (651).
Presentation of the year-end report
The year-end report and presentation materials are available at www.intrum.com/Investor relations. President & CEO Mikael Ericson and CFO Erik Forsberg will comment on the report at a teleconference on January 31, starting at 9:00 CET. The presentation can be followed at www.intrum.com and/or www.financialhearings.com. To participate by phone, call +46 566 426 62 (SE) or +44 20 300 898 10 (UK).
For further information, please contact
Mikael Ericson, President and CEO, tel: +46 8 546 102 02
Erik Forsberg, CFO, tel.: +46 8 546 102 02
Erik Forsberg is the contact person according to the EU Markets Abuse Regulation.
The information in this year-end report is such that Intrum Justitia AB (publ) is required to disclose pursuant to the EU Markets Abuse Regulation and the Securities Markets Act. The information was submitted for publication through the agency of the contact person set out above on January 31, 2018 at 7:00 a.m. CET.