ANNUAL REPORT INTRUM JUSTITIA A N N U A L R EP O R T 2 0 ...
ANNUAL REPORT INTRUM JUSTITIA A N N U A L R EP O R T 2 0 ...
ANNUAL REPORT INTRUM JUSTITIA A N N U A L R EP O R T 2 0 ...
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36<br />
Board of Directors’ report<br />
Regional revenues for the year, excluding purchased<br />
debt revaluations, amounted to SEK<br />
1,402.5 M (1,692.1). Revenues in local currencies<br />
fell by –7.9 percent. Operating earnings<br />
excluding revaluations amounted to SEK<br />
208.5 M (142.0), equivalent to a margin of<br />
14.9 percent (8.4). Operating earnings in local<br />
currencies improved by 18.2 percent.<br />
An adjustment to the accounting principles<br />
in this region negatively affected revenues<br />
in the amount of SEK 64.4 M; however the<br />
change had no impact on operating earnings.<br />
Credit management services 78%<br />
Financial services 22%<br />
SERVICE LINES<br />
Share of consolidated revenues, %<br />
SERVICE LINES<br />
Intrum Justitia’s offering is divided into two<br />
services lines:<br />
• Credit Management. Credit information,<br />
payment services and debt collection.<br />
• Financial Services. Financing, payment<br />
guarantee and purchase of receivables. Acquisition<br />
of portfolios of consumer receivables<br />
at less than their nominal value, after<br />
which Intrum Justitia collects the receivables<br />
on its own behalf. The service line also includes<br />
guarantees for charge card receivables.<br />
CREDIT MANAGEMENT<br />
The service line’s revenues for the year amounted<br />
to SEK 3,274.3 M (3,548.3). Revenues in<br />
local currencies fell by –0.5 percent. Operating<br />
earnings amounted to SEK 471.9 M (398.3),<br />
equivalent to a margin of 14.4 percent (11.2).<br />
Operating earnings in foreign currencies improved<br />
by 26.0 percent.<br />
PURCHASED DEBT<br />
The service line’s revenues for the year amounted<br />
to SEK 860.5 M (924.1). Revenues in local<br />
currencies were largely unchanged despite a<br />
negative effect relating to changes to the financial<br />
statements in the Netherlands; see below.<br />
Operating earnings increased to SEK 382.6 M<br />
(361.9).<br />
Disbursements for investments in purchased<br />
debt amounted to SEK 1,049.6 M (870.6) including<br />
SEK 178.4 M in connection with the<br />
acquisition of Nice Invest Nordic AB. The<br />
return on purchased debt was 16.3 percent<br />
SEK M<br />
3,000<br />
2,500<br />
2,000<br />
1,500<br />
1,000<br />
500<br />
0<br />
1,318<br />
1,882<br />
2,330<br />
06 07 08 09 10<br />
Carrying value of purchased debt<br />
(15.6) for the full year. As of year-end, the<br />
Group’s purchased debt had a carrying value of<br />
SEK 2.373.4 M (2,311.9).<br />
At year-end Intrum Justitia acquired Nice<br />
Investment Nordic AB, a company that invests<br />
in overdue receivables from mail order and ecommerce<br />
clients and the financial debt arising<br />
in connection with the receivables. The acquisition<br />
involved an investment of SEK 178.4 M<br />
in existing purchased debt portfolios as well as<br />
forward-flow contracts for a combined nominal<br />
value of SEK 915 M over the next five years.<br />
Activity in the purchased debt operation was<br />
very successful, particularly towards the end of<br />
the year, and the prospects are good for investment<br />
in 2011 as well.<br />
In accordance with IFRS, Intrum Justitia<br />
applies an accounting model (the effective<br />
interest method) where the carrying amount<br />
of each debt portfolio, and thus net earnings<br />
for the quarter, is based on discounted future<br />
cash flows updated quarterly. The discounted<br />
rate applied varies by portfolio based on the<br />
estimated effective interest rate at the time<br />
of acquisition. If estimated future cash flows<br />
change, the effective interest rate can be adjusted<br />
within the range of 8 – 25 percent. In<br />
this way, the carrying amount is not affected<br />
by changes in cash flow projections as long as<br />
the effective interest rate remains within the<br />
stipulated range.<br />
A portfolio is never carried at higher than<br />
cost. In other words, the portfolios are not<br />
marked to market. During the year the carrying<br />
amount of purchased debt was adjusted by<br />
a net of SEK 3.2 M (–35.7) due to changes in<br />
estimates of future cash flows as specified below.<br />
Adjustments are reported as part of quarterly<br />
amortization, as a result of which revenues<br />
and operating earnings are affected equally.<br />
This is because purchased debt revenues are<br />
reported as the net of the collected amount less<br />
amortization.<br />
EXPENSES<br />
The gross profit margin was higher than the<br />
previous year, partly as a result of efficiency<br />
improvement programs in several countries<br />
and because unprofitable customer contracts<br />
in England were terminated. Administrative<br />
2,312<br />
2,373<br />
SEK M<br />
Revaluation of purchased<br />
debt by region<br />
2010<br />
GROUP<br />
2009<br />
Northern Europe 11.0 3.3<br />
Central Europe –1.9 –6.8<br />
Western Europe –5.9 –32.2<br />
Total 3.2 –35.7<br />
costs for the previous year included nonrecurring<br />
expenses relating to the restructuring in<br />
England. Central costs for 2010 were charged<br />
with the cost of the acquisition and integration<br />
of purchased operations in the Northern<br />
Europe region in the amount of SEK –15.3<br />
M and restructuring costs in connection with<br />
the transition to three geographical regions of<br />
SEK –9.4 M.<br />
Depreciation/amortization<br />
Operating earnings for the year were charged<br />
with depreciation/amortization of SEK 171.4<br />
M (164.9). Operating earnings before depreciation/amortization<br />
therefore amounted to<br />
SEK 902.0 M (833.1). The value of client<br />
relationships recognized in the balance sheet<br />
and relating to fair value revaluations in connection<br />
with acquisitions amounted to SEK<br />
156.0 M (78.3) including 101.4 M attributable<br />
to Nice Invest Nordic AB. Client relationships<br />
were amortized during the year in<br />
the amount of SEK 14.5 M (21.8).<br />
Share-based payment schemes<br />
In 2008 a performance-based share program<br />
was introduced in accordance with a resolution<br />
at the Annual General Meeting and was<br />
divided into two parts: performance periods<br />
2008 – 2009 and 2008 – 2010 respectively. The<br />
performance criteria in the form of growth in<br />
earnings per share was not reached for either<br />
part of the scheme, and the performance shares<br />
that could have been exercised to acquire shares<br />
in 2010 – 2012 and 2011 – 2013 respectively<br />
have expired without value.<br />
The share-based payment schemes are recognized<br />
in accordance with IFRS 2 Share-<br />
Based Payment, and statement UFR 7 from<br />
the Swedish Financial Reporting Board. Accordingly,<br />
the cost may vary between years<br />
depending on the share price and option value.<br />
The effect on earnings of the Group’s<br />
share-based payment schemes relates to the<br />
part of the scheme with performance period<br />
2008 – 2010 and amounted to a costs reduction<br />
of SEK 2.6 M compared to a cost of SEK<br />
0.4 M for the same period the previous year.<br />
For more information on share-based payment<br />
schemes, see Note 32.