1. business and industrial

Interim report January - March 2015
May 6, 2015
Stable earnings geared for growth
Introduction to Hoist Finance
Introduction
Pan-European presence in nine countries
•
Established in 1994, Hoist Finance is a leading debt restructuring partner to
international banks
•
Main focus is the acquisition and management of bank-originated non-performing
unsecured consumer loans (NPLs)
•
Funding operations (HoistSpar) and Headquarter
Debt Purchasing and Debt Collection operations
20 year track record of successfully acquiring and collecting on more than 1,550
NPL portfolios
•
Amicable collection process striving for sustainable repayment plans
•
Licensed and supervised by the SFSA with access to cost-efficient deposit funding
base, HoistSpar, in Sweden (98% of deposits covered by Swedish deposit
guarantee scheme)
•
Diversified funding through senior and subordinated unsecured bonds in SEK and
EUR
12%
24%
17%
Carrying
value(1)
8.8bn
27%
20%
Clear focus on debt purchase and FIs
PRODUCT MIX(2)
TYPE OF DEBT(3)
Revenue Q1 2015
Carrying value 31 March 2015
Third-party
collections &
Other
10%
Trade & Other
4%
Debt Purchase
90%
Financial
Institutions (FI)
96%
Focus on bank originated debt
1) Including run –off portfolio of consumer loans and portfolios contained in joint venture
2) Third-party collections and other ratio defined as revenue from servicing divided by total revenues
3) Financial institutions ratio defined as unsecured B2C FI debt to total. Trade & Other include unsecured B2C Retail, Secured and Other
2
Solid business model with over 20 years of experience
Hoist Finance acquires non-performing consumer
loans primarily from banks…
…which are collected in a responsible manner…
…and provide for stable and predictable cash flows
over a long time period
2-3x
1. Contact
Loans
Loans
Loans
Loans
Loans
5–10% of
face value
Loans
2. Open dialogue
Purchase 1-2 years 3-4 years 5-6 years 7-8 years 9-10 years Cash
price
collections
3. Agreement
Hoist Finance is a leading debt restructuring
partner to international banks
Optimised model for collections, both in-house and
outsourced collection
High earnings visibility due to strong track record of
collections
Portfolios from well reputed international banks
Diversified presence – we are where our clients are
Debt portfolios based on responsible origination
Liquidity and economy of scale benefits
Focus on compliance, reputation and ethical behaviour
Diversified funding
3
Amicable settlements
AMICABLE AND RESPECTFUL COLLECTIONS

Collection model shaped over 20 years of collections
on own books

Small installments debtors can afford, long term
solutions
Will pay
Will not pay
Can pay
Process payment
Legal enforcement
Cannot pay
Nominal payment
Diarise
INSTALMENT PLANS VS. ONE-OFF COLLECTIONS(1)

One-off
13%
Amicable approach to facilitate better consumer
recovery and provide stable cash flows
1. Contact

In-house collection model, complemented by
preferred partners in selected markets
2. Open Dialogue
Instalment
plans
87%
3. Agreement
Flexible full service offerings adapted to client needs
4
Highlights Q1
Key events during the quarter
• Successful listing on Nasdaq Stockholm with broad interest from
Swedish and international investors
• With substantially improved capital adequacy and strong liquidity we
are now well positioned for continued growth
• Q1 well in line with our expectations with stable earnings
• Negative impact from one-off items in Q1 costs
– IPO related cost (SEK 78M, whereof 45M over P&L)
– Hedging derivatives (SEK 20M)
• Seasonality effect on portfolio investments
• Newly acquired platforms in Italy and Poland are well integrated and
performing according to plan
S
5
First quarter key financial highlights
Gross cash collections
EBIT (adjusted for IPO costs)
(SEK million)
(SEK million)
+33%
+48%
791
121
Q1 2015
Q1 2014
161
536
Q1 2014
Total revenue
Portfolio acquisitions
(SEK million)
(SEK million)
434
+40%
499
-37%
273
358
Q1 2014
Q1 2015
Q1 2015
Q1 2014
Q1 2015
6
Seasonality in portfolio acquisitions
Prerequisites
Outcome
SEK million
3 500

The timing of our portfolio investments are uneven
during the year. In 2014 47% of our investments came
in the fourth quarter of the year
3 000
2 500
2 000

This has an impact on collections, cash flow, capital
ratios end earnings.
1 500
1 000

Therefore we tend to see the highest growth in EBIT
in the second half of the year
500
0
2013
2014
2015
Q1
Q2
Q3
Q4
7
Regional overview – Germany and Austria
Comments
Q1 2015
Q1 2014
Change
Full year
2014
Gross cash collections
252
154
63%
724
Total revenue
108
101
7%
446
EBIT
41
46
-11%
195
EBIT-margin, (%)
38
46
-8 pp
44
Carrying value1
2 137
1 807
18%
2 232
120-month ERC2
3 686
3 188
16%
3 817
SEK million
• Gross cash collections up 63%. We have successfully
realized a sale of a large secured asset
• EBIT margin down as it suffers from fast amortizing
performing book acquired in 2012. Adjusting for this
the EBIT margin is stable
• Portfolio acquisitions up from last year
1) Including run-off portfolio of consumer loans
2) Excluding run-off portfolio of consumer loans
8
Regional overview – France, Belgium and the Netherlands
Comments
• EBIT improved by 80% predominantly driven by the
Netherlands
Q1 2015
Q1 2014
Change
Full year
2014
Gross cash collections
178
158
13%
733
• Restructuring in France running according to plan and cost.
Guyancourt site will be closed down mid summer
Total revenue
74
55
36%
256
• Portfolio purchase down as a large portfolio was acquired
in the Netherlands in Q1 2014
EBIT
25
14
80%
61
EBIT-margin, (%)
34
26
8 pp
24
Carrying value
2 124
1 968
8%
2 194
120-month ERC
3 398
3 279
4%
3 512
SEK million
9
Regional overview – UK
Comments
Q1 2015
Q1 2014
Change
Full year
2014
Gross cash collections
152
133
14%
527
Total revenue
146
110
33%
458
EBIT
46
38
21%
181
EBIT-margin, (%)
31
34
-3 pp
40
Carrying value
1 869
1 317
42%
1 798
120-month ERC
3 399
2 450
39%
3 391
SEK million
• Cash collections up by 14% as a result of a growing book
• Increased litigation activities undertaken which will
support cash collections going forward however slightly
affecting margins short term
• Slow quarter in terms of purchasing
10
Regional overview – Italy
Comments
Q1 2015
Q1 2014
Change
Full year
2014
Gross cash collections
123
50
146%
261
Total revenue
80
26
205%
170
EBIT
40
17
137%
64
EBIT-margin, (%)
50
65
-15 pp
37
Carrying value
1 108
294
278%
1 181
120-month ERC
2 234
455
391%
2 407
SEK million
• Gross cash collections up 146% as a result of the strong
investment level last year
• EBIT margin back-on-track following the acquisition of
TRC August last year
• No further acquisitions in Q1 as focus has been on
integrating the large portfolio purchased in December
last year
11
Regional overview – Poland
Comments
Q1 2015
Q1 2014
Change
Full year
2014
Gross cash collections
86
41
112%
296
Total revenue
75
54
40%
279
EBIT
55
42
31%
202
EBIT-margin, (%)
73
78
-5 pp
72
Carrying value
1 254
810
55%
1 182
120-month ERC
2 521
1 586
59%
2 449
SEK million
• Navi Lex integrated and all contracts managed by
external DCAs transferred in-house
• EBIT margin coming down somewhat as following the
acquisition of Navi Lex, but remains at very attractive
level
• Portfolio purchase have marginally increased year on
year
12
Financial highlights
SEK M
Quarter 1 2015
Quarter 1 2014
Change %
Gross cash collections
791
536
48
Net revenue from acquired loans
435
306
42
Total revenue
499
358
40
EBIT
115
121
-5
Costs in connection to the listing in the income statements
45
-
n/a
EBIT adjusted for costs in connection to the listing
161
121
32
EBIT margin adjusted for costs in connection to the listing, per cent
32
34
-2 pp
-108
-20
-71
3
51
n/a
Profit before tax
7
50
-86
Profit before tax, adjusted for costs in connection to the listing
52
50
4
Net profit for the period
4
39
-91
Portfolio acquisitions
273
434
-37
Return on equity, %
1
19
-18 pp
31 Mar 2015
31 Mar 2014
Change %
Carrying value of acquired loans, SEK M1
8,827
6,579
34
Gross ERC 120 months, SEK M2
15,238
10,958
39
Total capital ratio, %
17.13
9.18
8 pp
CET-1 ratio, %
14.33
5.68
9 pp
61
48
13 pp
Financial net
- whereof net income from financial transactions
Liquidity ratio, %
1) Including run-off portfolio of consumer loans and portfolios contained in joint venture
2) Excluding run-off portfolio of consumer loans and portfolios contained in joint venture
13
Balance sheet
Balance sheet structure Q1 2015
Balance sheet development
SEK million
SEK million
7 429
Cash and
Interest-bearing
Securities
44%
Liquidity
Reserve
7 455
608
Floating Deposits
Other Liabilities
Q1 2015
Q1 2014
Change
Cash and interest-bearing securities
7 429
4 622
61%
Acquired loans1
8 827
6 579
34%
593
266
123%
Total
16 849
11 467
47%
Deposits
12 317
9 100
35%
1 464
729
101%
Subordinated debt
334
330
1%
Other liabilities
608
460
32%
2 126
848
151%
16 849
11 467
47%
Other assets
Senior unsecured debt
4 863
Acquired Loans
8 827
1-3 Year Deposits
Shareholders’ equity
52% Termfunding
1 464
Other Assets
593
Senior Unsecured Debt
334
Subordinated Debt
2 126
Shareholders Equity
(incl. Tier 1)
Total
1) Including run-off portfolio of consumer loans and portfolios held in joint venture
14
Hoist Finance in a low interest rate environment
Impact on
financial net
Recent development
Strive for diverse funding,
reducing mismatch
Hedging strategy
Lowering offered deposit
rates
Receiving even more modest
yield on liquidity
Near term outlook
• Net deposit inflows with mix moving
towards term deposits
• EUR-bond issued
• Falling rates impacting mark- to
market valuation
• We anticipate this effect to unwind
in the medium term
Term deposits in favor of Flex
Further bond issues unlikely
Periods of deposit outflow
would not jeopardize liquidity
level
• Instant effect on “Flex” accounts,
gradual effect on term deposits
• Low risk profile
• Short tenor
15
Funding structure, capital- and liquidity ratios
Funding structure
Capital ratios
17,1%
13%
2%
9%
8%
3%
7%
Equity
14,3%
Subordinated debt
Senior unsecured debt
21%
15,1%
9,2%
7,2%
5,7%
1-3 Year deposits
Floating deposits
30%
CET 1 ratio
Tier 1 capital ratio
Q1 2015
61%
Total capital ratio
Q1 2014
Liquidity ratios
46%
61%
Q1 2015
48%
Q1 2014
• Improved capital ratios
• Improved maturity matching
Liquidity ratio
• Strong liquidity ratio
Q1 2015
Q1 2014
16
Our strategy and financial targets
Cornerstones of our strategy
Our financial targets
TO CONTINUE TO POSITION THE COMPANY AS
THE LEADING DEBT RESTRUCTURING PARTNER TO
INTERNATIONAL BANKS
Profitability
By utilizing our operating leverage we aim to
achieve an EBIT margin of above 40% in the
medium term
• Strengthen platform in
current markets and continue
European expansion
• Maintain business focus and
underwriting discipline
• Optimize collection strategies
with primary focus on in-house
collections
Capitalization
Common equity Tier 1 capital (CET1) ratio to
exceed 12% with potential to temporarily go
below as a result of large portfolio or goodwill
acquisitions
• Utilize embedded operating
leverage to increase efficiency
• Maintain solid capital and
liquidity positions
Dividend policy
As we continue to foresee substantial acquisition
opportunities in our markets we will initially aim
to distribute around 25–30% of our net profit as
dividend over the medium term. Given the
historically strong cash flow generation of our
business, our long term aim is to distribute around
50% of the annual net profit as dividend
17
Outlook
• Continued focused strategy on profitable growth and
geographical expansion
• Well placed to capture growth opportunities in the market
• Positive trend with substantial amount of portfolios in
pipeline
• Target for FY 2015: purchase volumes in line with or higher
than 2014
18
Key takeaways
• Q1 well in line with our expectations with stable earnings
• Seasonality effect on portfolio investments
• Impact from financial items and one-off cost related to IPO
• Newly acquired platforms well integrated and performing
according to plan
• Very strong balance sheet
19
Appendix
Cash flow (incl. Adjusted EBITDA)
Adjusted EBITDA reconciliation
Adjusted EBITDA development
Q1
2015
Q1
2014
Full Year
2014
Net profit for the period
4
39
180
SEK million
+ income taxes
4
11
38
+ portfolio revaluations
- interest income (excl. Interest from run-off
performing portfolio)
+ interest expense
3
0
15
-5
-10
-52
93
84
345
+/- net result from financial transactions
20
-3
18
+ depreciation and amortisation
11
7
30
EBITDA
130
128
574
SEK million
1 793
+27%
+ amortisation on run-off portfolio
20
31
91
+ amortisation on acquired loan portfolios
356
240
1128
Adjusted EBITDA
506
399
1 793
Capital expenditure PPE and IT
-13
-6
-79
Operating cash flow
493
393
1 714
506
399
Q1 2014
Net interest expenses (excl. Interest from
run-off performing portfolio)
Operating cash flow after financing expenses
-88
-74
-293
405
319
1 421
Portfolio acquisitions
273
434
3227
Q1 2015
Full year 2014
21