ANNUAL REPORT INTRUM JUSTITIA A N N U A L R EP O R T 2 0 ...

NET fINANCIAL ITEMS
The net financial expense amounted to SEK
–91.3 M (–79.8), including an exchange rate difference
of SEK –8.6 M (4.8). The net interest expense
was affected by higher market interest rates.
TAXES
The Group lost a tax dispute in Finland and has
paid and expensed an additional tax payment for
1999 – 2002 of SEK 41.8 M including fees of
SEK 21.5 M. The company has appealed the fees.
During the year the Group’s Swedish subsidiary
received a tax rebate of SEK 14.0 M which
was taken up as an expense in 2009.
The tax expenses for the year , excluding oneoff
items amounted to 24.9 percent (25.1). The
tax expense for the group is dependent in part
on how the earnings break down between subsidiaries
in different countries with different tax
rates. As a whole, the assessment that the tax expense
will be around 25 percent of pre-tax earnings
still stands.
The average tax expense depends in part on
the Group’s ability to achieve positive earnings
in the countries where pre-tax earnings
are negative. In some cases loss carryforwards
from previous years exist and can be used to
offset future profits. At the end of 2010 the
Group had loss carryforwards totaling SEK
2,289.2 M (1,962.6). Of this amount, SEK
129.5 M (287.7) is the basis for deferred tax
assets recognized in the balance sheet because
the Group has concluded that the loss carryforwards
can be used to offset taxable profit
over the next few years.
For more information about the Group’s
taxes, see Note 8.
RECLASSIfICATION IN
THE fINANCIAL STATEMENTS
In 2010 a correction was made to the reporting
of client funds in the Group’s subsidiary
in the Netherlands. Since the first quarter of
2009 this company had based its classifications
in the balance sheet on partially incorrect information
which was corrected in 2010. The
effect was a reclassification in the balance sheet
that affects the lines: Other receivables, Client
funds and Current liabilities to credit institutions.
The comparison figures from 2009 have
been restated based on the correction and the
effect on the balance sheet as of December 31,
2009 is that Clients funds on the assets side
and the liabilities side each increased by SEK
87.4 M and Other current receivables and Current
liabilities to credit institutions also each
increased by SEK 87.4 M
A gross amount recognised in the income
statement relating to repayments of expenses
in the Netherlands was also corrected. The correction
has not effected the operating earnings.
If the new principle had been applied in 2009,
the revenues for the year would have been SEK
64.4 M lower than reported.
CASH fLOW AND INVESTMENTS
Cash flow from operating activities improved
during the year to SEK 1,629.8 M (1,433.4).
Disbursements during the year for purchased
debt investments amounted to SEK 1,049.6 M
(870.6).
During the year SEK 145.5 M (235.9) was
invested in tangible and intangible fixed assets.
SEK M
2,000
1,600
1,200
800
400
0
874
1,013
1,261
Cash flow from operating activities
Research and development
The Group is not engaged in any research and
development other than the development of
its IT systems. Investments for the year largely
relate to hardware and software for IT systems,
mainly for production. Technological development
is rapid and, if used in the right way,
new technical solutions can improve efficiency
in the management of client receivables and
use of the Group’s databases. As demand for
customized IT solutions grow, it is of strategic
importance for Intrum Justitia to constantly
adapt to changes in demand. In 2009 the production
system for collections in Switzerland
and Austria was upgraded and was successfully
implemented in 2010 in Germany as well to
achieve efficiency improvements.
fINANCING
Net debt as of December 31, 2010 amounted
to SEK 2,193.3 M, compared to SEK 2,069.0
M as of December 31, 2009. The net debt as
of December 31, 2009 was restated from the
previously reported SEK 1,981.6 M in connection
with the reclassification in the financial
statements described above, whereupon the
net debt/equity ratio at the close of 2009 was
changed from 77.7 percent to 81.2 percent.
Shareholders’ equity including minority interest
amounted to SEK 2,576.6 M, compared
to SEK 2,548.9 M at the beginning of the year.
As of December 31, 2010 the Group had
liquid assets of SEK 507.1 M, compared to
SEK 491.4 M the previous year. Unutilized
credit facilities amounted to SEK 233.7 M,
compared to SEK 849.7 M the previous year.
1,433
1,630
06 07 08 09 10
SEK M
3,000
2,500
2,000
1,500
1,000
500
0
1,464
1,527
2,348
06 07 08 09 10
Net debt
Board of Directors’ report
The Group’s syndicated loan of EUR 310 M
expiring in February 2010 was repaid in January
and replaced by a new syndicated loan of
the same amount expiring in March 2013.
Most of the Parent Company’s and the
Group’s external borrowing has been arranged
in foreign currencies since February 2009 as a
means of hedging against net exposure in the
Group’s foreign subsidiaries.
RISK AND RISK MANAGEMENT
Intrum Justitia defines risk as all factors which
could have a negative impact on the ability of
the Group to achieve its business objectives.
All economic activity is associated with risk.
In order to manage risk in a balanced way, it
must first be identified and assessed. Intrum
Justitia conducts risk management at both
a Group and company level, where risks are
evaluated in a systematic manner.
Intrum Justitia’s risk management covers
strategic risks, operational risks, risk relating to
the regulatory environment and financial risks.
The following summary is by no means
comprehensive, but offers examples of risk factors
which are considered especially important
for Intrum Justitia’s future development.
Strategic risks
Cyclicality
The CMS industry, while in no way unaffected
by economic conditions, has historically, in
Intrum Justitia’s experience, been less affected
by economic fluctuations than many other sectors.
This is due to stabilizing forces in both
good times and bad. For Intrum Justitia, the
effects of economic conditions in individual
markets are also reduced by the Group’s geographic
diversity.
During periods of economic growth the
number of business transactions rises, as does
lending in general and thus the number of
invoices in circulation. Payment capacity also
increases and consequently the percentage of
invoices that become overdue and go to collections
declines. In absolute terms, however, the
number of overdue receivables and collection
cases usually rises at the same time as improved
payment capacity makes it easier to collect debt.
2,069
2,193
37