Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Intrum AB (ITJTY, Financial) reported a significant increase in EBIT margin, rising from 12% to 18% year-over-year, indicating improved operational efficiency.
- The company achieved a 45% increase in EBIT compared to the previous year, showcasing strong financial performance despite a seasonally weak quarter.
- Intrum AB (ITJTY) has successfully transitioned its investing business, with collections at 98% for the quarter and 106% against original forecasts, demonstrating effective portfolio management.
- The company has identified SEK1.5 billion in run-rate cost savings, with SEK1.1 billion already realized, reflecting a strong focus on cost efficiency.
- Intrum AB (ITJTY) has made progress in its recapitalization efforts, with overwhelming creditor support for a prepackaged Chapter 11 plan, ensuring a more stable capital structure moving forward.
Negative Points
- The third quarter was slightly behind expectations due to seasonal weaknesses, impacting overall performance.
- Goodwill write-downs of SEK700 million were recorded, primarily related to the UK and Norway, affecting the company's financial results.
- The company's leverage ratio increased to 4.2 from 3.9 in the previous quarter, indicating higher financial risk.
- Investment in the quarter was lower than anticipated at SEK311 million, below the target run rate, potentially impacting future growth.
- Organic growth in servicing was negative, particularly in Southern Europe, posing challenges to offsetting declines in other regions.
Q & A Highlights
Q: Can you provide details on the 98% portfolio collections performance and whether this underperformance is a one-off or a trend?
A: The 98% collection rate is slightly below our active forecast but is 106% against historical forecasts. The underperformance is concentrated in a few portfolios, particularly in Portugal and another Southern European country. We are addressing these issues by deploying more resources and expect to return to around 100% by year-end. (Andres Rubio, CEO)
Q: What triggered the goodwill write-down, and how does it relate to the performance in Norway and the UK?
A: The goodwill write-down is primarily related to the UK due to a transformation program taking longer than expected and changes in our weighted average cost of capital. The impact in Norway is minor. These write-downs are non-cash adjustments aligning our balance sheet with our business plan. (Johan Akerblom, CFO)
Q: With the cost base decreasing significantly, is there potential for further cost savings in 2025?
A: Yes, we are continuously looking for efficiencies beyond the SEK1.5 billion target. We believe we can achieve further cost reductions without sacrificing growth, particularly in Northern and Middle Europe. (Andres Rubio, CEO)
Q: Can you explain the rationale behind choosing a prepackaged Chapter 11 for recapitalization and its expected costs?
A: We chose Chapter 11 due to overwhelming creditor support and its efficiency in restructuring. The process is expected to be completed by year-end, with costs being significant but justified by the benefits of extending maturities and aligning our capital structure with our business plan. (Andres Rubio, CEO)
Q: How does the rollout of Othello, the AI-based collector, impact margins and client relationships?
A: Othello allows us to collect at similar rates but with 10-20% lower costs, enhancing margins. Clients view this technology as a value-add, allowing us to maintain pricing while improving customer experience. This is a significant step in our technological transformation. (Andres Rubio, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
