Intrum AB - Interim results April-June 2023
- Seasonally stronger second quarter supported by high commercial activity and growing Assets under Management (AUM)
- Cash revenues growth driven by CMS segment while Strategic Markets and Portfolio Investments are stabilising after a period of prolonged growth
- Leverage ratio increased to 4.6x driven by front-loaded investments in the quarter, dividend payment and adverse FX movements
- Delivered on several strategic priorities: completed the acquisition of Arrow's servicing platforms in the UK, agreed the acquisition of Haya Real Estate in Spain, completed the exit of Brazil, signed agreements to exit Romania and the Baltics and also agreed the sale of a non-core platform in Finland
- Cost program target upgraded from SEK 0.6 billion to more than SEK 0.8 billion, most of which will be realised by the end of 2023 on a run-rate basis
- Key priorities going forward are to grow servicing cash flows and reduce leverage
- All available cash flow will principally be dedicated to reducing leverage and improving our financial risk profile. To this end we will: (i) investigate exiting three additional markets, (ii) strictly limit balance sheet investing activities in 2023 and 2024, while exploring asset management business model, (iii) recommend no dividend payable in 2024 after paying SEK 13.5 per share in 2023 (~18 per cent on SEK 75 share price) and (iv) investigate further measures to reduce leverage
- Cash revenues increased to SEK 6,414 M (6,266)
- Cash EBITDA decreased to SEK 3,236 M (3,408)
- Adjusted revenues increased to SEK 4,978 M (4,825)
- Adjusted EBIT decreased to SEK 1,468 M (1,701)
- Q2 cash EPS was SEK 6.16 (9.12)
- Q2 adjusted return on Portfolio Investments was 14 per cent (14)
- Available liquidity at the end of the quarter was SEK 13 bn (17)
Presentation of the interim report
Andrés Rubio, President & CEO and Michael Ladurner, CFO, will present the results and answer questions in an audiocast with telephone conference at 9:00 a.m. CET. The conference will be held in English.
To participate via audiocast, please use this link (https://ir.financialhearings.com/intrum-q2-2023)
To participate via teleconference, please register here (https://conference.financialhearings.com/teleconference/?id=200859)
Comment by President & CEO Andrés Rubio
"The second quarter was seasonally stronger with a high level of activity across the business. During the quarter we have delivered on a number of important steps to Simplify & Focus our business. We signed agreements to exit Brazil, Romania and the Baltics and in addition we have also sold a platform of non-core activities in Finland. At closing, these transactions will release SEK ~ 0.6 billion in cash. In addition, we have now decided to investigate a potential sale of activities in Czech Republic, Slovakia and Hungary with any proceeds available to reduce net debt.
We continue to build and strengthen the servicing business in two of our key Franchise markets by closing the acquisition of Arrow's servicing platforms in the UK as well as signing the acquisition of the Haya Real Estate servicing platform in Spain. In the UK, the platforms will add secured loan and asset servicing capabilities and thereby broaden and deepen the service range that we can offer existing and new clients. In Spain, the Haya acquisition brought large contracts with key clients including BBVA, Caixa Bank and Grupo Cooperativa CajaMar and led to Intrum being subsequently awarded a long-term contract for the management of CaixaBank's real estate portfolio.
As part of the cost program launched at the end of the first quarter 2023, we have continued to analyse and define potential savings, enabling us to raise the bar. This targeted program will therefore be upgraded from the original goal of SEK 0.6 billion to more than SEK 0.8 billion, most of which will be realised by the end of 2023 on a run-rate basis.
Our priorities going forward are to: (i) grow servicing cashflows and (ii) reduce leverage
As the largest third-party servicer in Europe, we stand to significantly benefit from: (i) our recent management changes and increased commercial focus, (ii) opportunity to serve our clients across more stages of the credit value chain, and (iii) focusing of our geographical footprint on the most important markets. This will serve as a catalyst to grow servicing revenues, in an environment where our services are needed more than ever. This top line growth together with our near-term cost reduction and our continued focus on servicing margin will lead to improved operating leverage and increasing cash generation from this capital light business. This cash flow will be deployed principally to reduce debt and to strengthen the Servicing business through strategic M&A.
In addition, we are pursuing selected, targeted measures to directly reduce leverage. As outlined above, we are investigating three further, more sizeable market exits (already exited 5 markets in H1 2023) and plan to strictly limit any new balance sheet funded investing activities for the remainder of 2023 and 2024, while exploring a capital light asset management business model. The Board and Management do not intend to propose to the next AGM any dividend payable in 2024. This action needs to be put into the context of the declared SEK 13.5 per share dividend for 2023 (equating to an implied yield of ~18 per cent on a SEK 75 share price) with the second installment to be paid later this year. Furthermore, we are pursuing additional measures to reduce leverage.
As a consequence of these measures, our available cash flow will principally be dedicated to reducing leverage and improving our financial risk profile.
At our Capital Markets Day on September 13, the management team and I will present our medium-term strategy, including operational and financial trajectory and targets."
For further information, please contact:
Emil Folkesson, Head of CFO Office & Investor Relations Director
+46 70 744 69 82
This information is information that Intrum AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out below, at 07.00 CET on 20 July 2023.