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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Accounts receivable<br />
The Group’s accounts receivable from clients and debtors in various industries,<br />
and are not concentrated in a specific geographical region. The Group’s largest<br />
client accounts for less than two percent of revenues. Provisions for impaired<br />
receivables amounted to SEK 10.2 M (16.3) during the year.<br />
Purchased debt<br />
As part of its operations, Intrum Justitia acquires portfolios of consumer receivables<br />
and tries to collect them. Unlike its conventional collection operations<br />
where Intrum Justitia works on behalf of clients in return for commissions<br />
and fees, in this case it assumes all the rights and risks associated with<br />
the receivables. The portfolios are purchased at prices significantly below their<br />
nominal value, and Intrum Justitia retains the entire amount it collects, including<br />
interest and fees.<br />
The acquired receivables are overdue and in many cases are from debtors<br />
who are having payment problems. It is obvious, therefore, that the entire<br />
nominal amount of the receivable will not be recovered. On the other hand,<br />
the receivables are acquired at prices significantly below their nominal value.<br />
The risk in this business is that Intrum Justitia could, at the time of acquisition,<br />
overestimate its ability to collect the amounts or underestimate the costs<br />
of collection. The maximum theoretical risk is of course that the entire carrying<br />
value of SEK 2,373.4 M (2,311.9) would become worthless and have<br />
to be written off.<br />
To minimize the risks in this business, Intrum Justitia exercises prudence<br />
in its purchase decisions. The focus is on small and medium-sized portfolios<br />
with relatively low average amounts, to help spread risks. The average nominal<br />
value per case is approximately SEK 7,100. Purchases are usually made<br />
from clients with whom the Group has maintained long relationships, so it<br />
is usually familiar with the receivables in question. The acquisitions generally<br />
involve unsecured debt, which reduces the capital investment and significantly<br />
simplifies administration compared with collateralized receivables. Intrum<br />
Justitia places high yield requirements on the portfolios it acquires. Prior to an<br />
acquisition, a careful evaluation is made based on a forecast of future cash flow<br />
(collected amount) from the portfolio. In these calculations Intrum Justitia<br />
benefits from its extensive experience in debt collection and from the Group’s<br />
scoring methods. Intrum Justitia therefore believes it is capable of evaluating<br />
this type of receivable. To facilitate acquisitions of large portfolios at an attractive<br />
risk level, Intrum Justitia cooperates with other companies and shares the<br />
capital infusions and profits. Such alliances have been in place with Calyon<br />
Bank since 2002 and with Goldman Sachs sedan 2003 and with East Capital<br />
and the European Bank or Reconstruction and Development since 2010.<br />
Risks are diversified by acquiring receivables from clients in different sectors<br />
and different countries. The Group’s portfolio comprises receivables from<br />
debtors in 21 countries, the largest of which are Sweden (22 percent of the<br />
Group’s total carrying value of purchased debt), Netherlands (11 percent),<br />
Finland (10 percent), Germany (9 percent) and Austria (8 percent). Of the<br />
total payable value of the Group’s portfolio of receivables sellers in the banking<br />
sector account for 35 percent, telecoms 25 percent, credit card debts 14<br />
percent, other finance 14 percent and other segments 12 percent.<br />
Of the total carrying value at year-end, 26 percent represents portfolio acquisitions<br />
in 2010, 19 percent acquisitions in 2009, 18 percent acquisitions<br />
in 2008. The remaining 17 percent relates to receivables acquired in or before<br />
2007, which have therefore been past due for over three years. In the case of<br />
a large share of the oldest receivables, Intrum Justitia has reached agreement<br />
with the debtors on payment plans.<br />
Outlays on behalf of clients<br />
As an element in its operations, the Group incurs outlays for court fees, legal<br />
representation, bailiffs, etc., which can be charged to and collected from debtors.<br />
In many cases Intrum Justitia has agreements with its clients where any<br />
expenses that cannot be collected from debtors are instead refunded by the client.<br />
The amount that is expected to be recovered from a solvent counterparty<br />
is recognized as an asset in the balance sheet on the line, Other receivables.<br />
Derivative contracts<br />
The credit risk in the Group’s forward exchange contracts is because the counterparty<br />
generally is a large bank or financial institution. The company does<br />
not expect any of these counterparties to become insolvent.<br />
Notes<br />
Charge card guarantees<br />
As part of its service offering in Switzerland, Intrum Justitia reviews charge<br />
card applications for card issuers and guarantees – for a fee – that the issuers<br />
will receive full compensation for the value of their receivables if the cardholder<br />
fails to pay. The total guarantee at year-end amounted to SEK 1,371.2<br />
M (1,270.9), of which receivables overdue by more than 30 days amounted to<br />
SEK 5.5 M (0.8). Intrum Justitia’s risk in this operation is managed through<br />
strict credit limits on the issuance of new charge cards and through analysis of<br />
the credit rating of cardholders. As of year-end Intrum Justitia had allocated<br />
SEK 15.4 M (14.0) in the balance sheet to cover payments that may arise due<br />
to the guarantee.<br />
NOTE 39<br />
ACQUISITIONS Of OPERATIONS<br />
The Nordic CMS operation of Aktiv Kapital<br />
The 16 of December 2010 Intrum Justitia finalised the acquisition of Aktiv<br />
Kapital’s Nordic credit management operations for external clients. The<br />
acquired operation includes all shares in three companies that together<br />
have 150 employees in Norway, Sweden and Finland and revenues in<br />
2010 amounted to SEK 234.6 M. Through the aqcuistion Intrum Justitia<br />
stregthens its market position, primarily in Norway. In Finland and Sweden<br />
the market leadership is further stretgthened.<br />
Costs related to the acquisition amounted to SEK –6.0 M. The result is<br />
also charged with costs of SEK 5.6 M for restructuring the acquired operation.<br />
Preliminary the acquistion is reported in accordance to the following:<br />
Carrying<br />
Fair value<br />
value before Adjustment recognized in<br />
SEK M<br />
acquisition to fair value the Group<br />
Intangible fixed assets 0.4 19.3 19.7<br />
Tangible fixed assets 14.3 – 14.3<br />
Current assets 26.0 – 26.0<br />
Liquid assets 120.8 – 120.8<br />
Deferred tax liabilities/assets –4.2 –4.9 –9.1<br />
Current liabilities –41.1 – –41.1<br />
Net assets 130.6<br />
Group goodwill 429.2<br />
Purchase price paid in cash<br />
and acquisition costs<br />
–559.8<br />
Liquid assets (acquired) 120.8<br />
Net effect on liquid assets –439.0<br />
The acquired operations are consolidated from December 16 2010 and is<br />
contributing to the Group revenues with SEK 10.6 M and to the Group<br />
operating result with SEK –3.8 M. If the aqcuistion would have been excecuted<br />
by January 1 2010 it would have contributed to the Group revenues<br />
with SEK 234.6 MSEK and to the operating result with SEK 46.6 M. The<br />
reported goodwill item is attributable to synergies and increased market share.<br />
Nice Invest Nordic AB<br />
On December 28 2010 Intrum Justitia stregthened its market position in Sweden<br />
further by acquiring Nice Invest Nordic AB, wich focuses on investing in<br />
Purchased Debt from clients within mail-order and e.commerce and financial<br />
receivables that such business entail. The acquisition includes an existing<br />
portfolio and an agreement regarding forward-flow contracts.<br />
Preliminary the acquistion is reported according to the following. In the<br />
Cash-flow statement SEK 178.4 M from the acquisition is reported under<br />
Debt Purchases.<br />
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