Full-year Report 2003

Full-year Report 2003 Organic growth, excluding England, 9% · Consolidated revenues rose by 3% to SEK 2,864.6 M (2,774.9) in 2003. · Net earnings amounted to a deficit of SEK -180.2 M (173.3). Earnings for the year include items affecting comparability of SEK 398.0 M (8.5) as follows (SEK M): Integration expenses in Germany, the Netherlands and Belgium 42 Related to England As per previous information: - Accounting inaccuracies 80 - Harmonization to Group policies 104 - Investigation expenses 34 218 Related to full-year report - Write-down of part of goodwill 103 - Group adjustment 20 - Year-end provision 15 138 Total 398 · Earnings per share for the year were SEK -2.12 (2.61). Cash flow from operating activities during the same period amounted to SEK 301.8 M (333.1). · Organic growth for the year, excluding the English operations, amounted to 9%. Adjusted EBITA, excluding England and related expenses, amounted to SEK 433.4 M, an increase of 16% for the year. · The Board of Directors proposes that no dividend be paid for the fiscal year. The Intrum Justitia Group Intrum Justitia is Europe's leading credit management services group, with revenues of SEK 2.9 billion and around 2,900 employees in 21 European countries. Comment on audit Prior to the release of the full-year accounts, the auditors completed their review of all Group units with the exception of the English operations. As a consequence, the company has decided to establish a provision to cover uncertainties related to reconciliation differences of SEK 15 M, which is reported among items affecting comparability in the fourth quarter. October-December 2003: Revenues and earnings Consolidated revenues in the period October-December amounted to SEK 742.7 M (750.8), a decrease of 1%. Organic growth accounted for 0.5 percentage points, with 2.7 percentage points from acquisitions (the French enter-prises Jean Riou Contentieux and Cofreco). The apprecia-tion of the Swedish krona generated -4.2 percentage points. Organic growth was affected negatively by developments in England and lower revenues in the Swiss credit information and credit guarantee operations, which have been scaled down in part to adapt to prevailing economic conditions. Excluding England, consolidated revenues grew organically by 9%. Adjusted EBITA declined by 32% to SEK 97.4 M. The lower result is mainly due to England, though also to Swit-zerland and Norway, while positive development in France, Poland and the Netherlands limited the decline. Excluding England, adjusted EBITA fell by 9%, from SEK 129.5 M in the corresponding period of 2002 to SEK 117.5 M. Operating earnings (EBIT) amounted to a deficit of SEK -72.3 M (110.2). Earnings before tax and minority interests for the quarter amounted to a deficit of SEK -80.5 M (99.2) Net earnings for the period were SEK -151.6 M (92.1). January-December 2003: Revenues and earnings Consolidated revenues for the full-year 2003 amounted to SEK 2,864.6 M (2,774.9), an increase of 3%. Organic growth accounted for 3 percentage points, with 4 percent-age points from acquisitions (Stirling Park in Scotland and the French enterprises Jean Riou Contentieux and Cofreco). The appreciation of the Swedish krona generated -4 per-centage points. Organic growth was affected negatively by developments in England. Excluding England, consolidated revenues grew organically by 9%. Adjusted EBITA declined by 11% to SEK 428.1 M as a result of the downward earnings trend in England, Switzer-land and Norway. Excluding England, adjusted EBITA rose by 16%, from SEK 374.0 M in the corresponding period of 2002 to SEK 433.4 M. Operating earnings (EBIT) fell to a deficit of SEK -93.9 M (346.2). Earnings before tax and minority interests for January-December amounted to a deficit of SEK -146.8 M (238.4). Net earnings for the year were SEK -180.2 M (173.3). Earnings per share for the full-year amounted to a deficit of SEK -2.12 (2.61). Service Line Highlights Consumer Collection & Debt Surveillance: A significant share of consolidated revenues was attributable to this service line. Demand for collection services is good, with volume increases primarily in the telecom industry and energy sector. Service line revenues for the period grew from SEK 443.8 M in the previous year to SEK 445.3 M in 2003. A portion of the increase is attributable to the acquired enterprises Cofreco and Jean Riou Contentieux. Organic growth was 1% in the fourth quarter. The service line achieved strong organic growth in the Netherlands and Poland, where increased volumes from new and existing telecom and energy customers contributed to the strong development. Finland, Sweden and France also contributed to organic growth, principally through increased volumes from key customers in the above-mentioned sectors, in addition to more widespread outsourcing among small and medium enterprises. Excluding England, this service line achieved 14% organic growth. Operating earnings (EBITA) for the fourth quarter decreased by 2% to SEK 99.2 M. Commercial & International Collection: Service line revenues amounted to SEK 164.1 M (174.6) during the quarter. One reason for the downturn was England, where decreased service line volumes have not yet recovered. Revenues were down 5% organically. Excluding England, the service line reported nil organic growth in the fourth quarter. Service line growth was held in check by Switzer-land, Norway and Belgium, which were affected adversely by lower case inflows. Increased volumes, primarily from acquired enterprises in France, contributed to revenue gains. Otherwise, a number of service line operations experienced a weaker fourth quarter year-on-year. The expenses to implement a new production system in Italy continued in the fourth quarter. Operating earnings (EBITA) for the period fell to SEK 9.5 M (15.8). Purchased Debt: Service line revenues rose to SEK 57.4 M (51.0) year-on-year in the fourth quarter. Operating earnings for the period were SEK 22.0 M, against SEK 25.2 M in 2002. The revenue increase is mainly due to Poland, where major acquisitions were made of banking and tele-com sector portfolios. Collection volumes from these and the Nordic portfolios were healthy during the quarter. The decrease in operating margins to 38% (49) is due in part to low collections from the English and Swiss portfolios and in part to higher portfolio pricing in countries including Poland. The fourth quarter of 2002 included a capital gain of SEK 5.5 M on the sale of a portfolio. Sales Ledger: Service line revenues rose year-on-year in the fourth quarter from SEK 26.2 M to SEK 35.6 M. The increase is due largely to England, Ireland and the Nether-lands, where higher demand for this type of service, mainly from the telecom sector, has led to greater volume inflows from a cluster of key customers. The operating deficit for the period was SEK -31.4 M (-10.9). The expanded deficit is attributable to the Dutch operations (EOS), where expenses in connection with a reorganization were charged to fourth-quarter earnings. Write-downs and expenses for the migra-tion of a production system in Sweden also affected earn-ings for the period. Furthermore, volumes in local operations have not yet covered expenses. Other Services: Service line revenues declined in the reporting period from SEK 80.2 M to SEK 64.5 M, while operating earnings amounted to SEK 13.9 M (25.4). The decrease in quarterly revenues for the service line is due primarily to a planned downsizing in the Swiss credit infor-mation and credit guarantee operation, which also affected earnings for the service line to some extent. Expenses The improved gross profit margin is largely the result of improved productivity and cost reductions in a number of countries. The increase in total administrative expenses relates mainly to England, where a stronger organization has been established. In addition, expenses for improved routines and control systems are estimated at SEK 19 M, of which SEK 12 M has been charged to the fourth quarter. The fourth quarter also includes severance pay and other expenses of SEK 20 M in connection with changes in executive positions. Items affecting Comparability Earnings for the year have been charged with items affect-ing comparability of SEK 398.0 M, of which expenses coincident with integration of the German operations ac-counted for SEK 39.2 M and a rationalization package in the Netherlands and Belgium SEK 3.3 M. In addition, total expenses of SEK 355.5 M related to the English operations, of which accounting inaccuracies account for SEK 80 M and harmonization to the Group's policies for SEK 104 M. These expenses have not affected cash flow. Also included are investigation expenses of SEK 34 M, which do affect cash flow. As part of closing the books for 2003 and following a review of cash-generating units, a write-down of part of goodwill relating to England of SEK 103 M has been deemed appropriate, after which the goodwill amounts to SEK 181 M. In addition, a group adjustment of SEK 20 M has been made. Finally, a year-end provision of SEK 15 M relating to England has been recorded. Net Financial Items Financial expenses were lower than the previous year due to improved funding terms secured for the full-year after a new loan agreement was signed in April and to lower market interest rates. Cash Flow and Investments Cash flow from operating activities amounted to SEK 301.8 M for January-December 2003, compared with SEK 333.1 M in the corresponding period of 2002. Around half of the Group's operational investments dur-ing the year were in the development and purchase of software for production and administration. Financing As of December 31, 2003 net debt was SEK 769.0 M, against SEK 813.1 M a year earlier. Shareholders' equity amounted to SEK 1,240.8 M (1,537.8) and was affected by the appreciation of the Swedish krona against the euro by 0.9% from December 31, 2002 to December 31, 2003 and by its appreciation against sterling (GBP) by 8.7% in the same period As of December 31, 2003 consolidated liquid assets to-taled SEK 243.2 M (123.4) and the group had unutilized credit facilities of SEK 301.7 M. Tax The Group reported a tax expense for the full-year of SEK 21.2 M. A deferred tax receivable was reported during the year for loss carry-forwards in Germany and France result-ing from a more positive assessment of the national compa-nies' development. This receivable has affected the tax expense positively by a total of SEK 40.7 M. The Group estimates that the items affecting comparability in England of SEK 355.5 M will result in recoverable tax of SEK 13.1 M. Minority Interests Minority interests in the income statement of SEK -12.2 M and balance sheet of SEK 17.3 M refer principally to the 40% minority holdings in the Group's companies in Poland, the Czech Republic and Hungary as of April 2003. Goodwill Consolidated goodwill amounted to SEK 1,528.1 M, against SEK 1,791.7 M at year-end 2002. The change during the year consists of investments in goodwill (SEK 38.4 M), goodwill amortization (SEK -124.0 M), write-downs (SEK -103.0), an adjustment of the acquisition balance for Stirling Park (SEK -6.3 M) and the effect of exchange rate fluctua-tions (SEK -68.7 M). Human Resources The average number of employees during the year was 2,870 (2,661). Aside from the employees added through acquired operations, there was a decrease in connection with the integration in Germany at the same time that Poland increased its staff to handle expanded volume from three major customers. Parent Company The parent company, Intrum Justitia AB (publ), provides the Group's head office functions and certain group-wide development and marketing services. The parent company had revenues of SEK 34.3 (23.6) and earnings before tax of SEK -23.0 M (-6.8). The parent company invested SEK 5.4 M (0.6) in fixed assets during the year and had liquid assets of SEK 0.0 M (6.2) at the end of the period. The average number of employees in the parent com-pany during the year was 20 (9). The increase is due to the fact that certain functions have been moved from the previ-ous head office in the Netherlands and because new func-tions have been established. Intrum Justitia AB has also given an unconditional shareholders' contribution to the wholly owned subsidiary Intrum Justitia International AB in the amount of SEK 600.0 M. Market and Outlook Several of the Group's major markets are reporting good growth. The trend toward increased outsourcing and higher indebtedness is expected to continue, particularly in the Consumer Collection service line. As a whole, consolidated revenues excluding England for full-year 2004 are expected to grow in line with the previous year. Other Organizational changes During the year the Group's head office was strengthened with new functions: Business Development, Chief Informa-tion Officer, Mergers & Acquisitions, Public Affairs and Treasury. Furthermore, new managers were recruited internally to lead operations in the following regions: Sweden, Norway & Denmark; United Kingdom & Ireland; Netherlands, Belgium & Germany and France, Spain & Portugal. The Intrum Justitia Share In 2003 the Intrum Justitia share declined from SEK 40.50 to SEK 38.00, or by 6%. During the same period Stockholms-börsen's All Share Index rose by 30%. The share price at year-end gives Intrum Justitia a market capitalization of SEK 3,230 M (3,442). Since August 20 the share has been placed on the so-called OBS-list. Stock Option Program The Annual General Meeting in 2003 resolved to approve the employee stock option program 2003/2009, according the right to acquire a maximum of 2,525,000 shares in Intrum Justitia AB (publ) at a price of SEK 57 per share and intended as an incentive program for around 20 senior executives of the Intrum Justitia Group. Subscription for the options is scheduled for 2004. It was also decided to issue 3,358,250 detachable warrants with the entitlement to subscribe for shares Intrum Justitia AB (publ) at a price of SEK 57 per share, in part as a hedge for the new shares as per the employee stock option program 2003/2009 and in part as a hedge for social security contributions in connec-tion with the program. If the stock options are fully exer-cised, it will lead to an increase in the share capital of SEK 67,165, corresponding to approximately 4 percent of the share capital and voting rights. The warrants expire on July 1, 2009. Proposed Dividend The Board of Directors and the President propose that no dividend be paid to the shareholders for fiscal 2003. Nomination Committee The Annual General Meeting on May 13, 2003 decided to assign the Chairman of the Board to annually form a Nomi-nation Committee, where the Chairman, prior to the upcom-ing Annual General Meeting, convenes one representative from each of the five largest shareholders according to the VPC register as per December 31 of the previous year. For the Annual General Meeting 2004, the Nomination Commit-tee comprises Bo Göransson (Parkerhouse Investment), Christian Salamon (Industri Kapital), Göran Espelund (Lannebo Funds), Mats Gustafsson (SEB) and Bo Ingemar-son, Chairman of Intrum Justitia AB (publ), as convener. Two of the five largest owners have declined to partici-pate and SEB, as the sixth largest owner, has been invited to take part in the work. In total, the members of the Nomi-nation Committee represent approximately 56 percent of the share capital. The proposal of the Nomination Committee will be pre-sented in the notice of the Annual General Meeting 2004. The committee welcomes proposals from other share-holders. Annual General Meeting The Annual General Meeting will be held at 4:00 p.m. (CET) on Wednesday, May 5, 2004 at Södra Paviljongen, Vasaga-tan 1, Stockholm, Sweden. The Annual Report is scheduled for publication and dis-tribution by mail to shareholders in mid-April 2004. The Annual Report will be available at Intrum Justitia AB's head office and at www.intrum.com. Accounting Principles This Interim Report has been prepared in accordance with generally accepted accounting practice in Sweden and accounting standard RR 20 of the Swedish Financial Ac-counting Standards Council (RR). The company has applied the same accounting princi-ples as in previous years. Although the Swedish Financial Accounting Standards Council has issued a number of new auditing recommendations that apply from 2003, none impact Intrum Justitia's reported earnings or financial position but merely the accounting formats and supplemen-tary disclosures in the Annual Report. When applying the new accounting standard RR 25, Segment reporting, Intrum Justitia regards geographical regions as its primary segments and service lines as secon-dary segments. Harmonization of New Accounting Principles From January 1, 2005 Intrum Justitia will report in accor-dance with International Financial Reporting Standards (IFRS, formerly IAS). Intrum Justitia currently complies with the recommendations of the Swedish Financial Accounting Standards Council. Although the latter have gradually been adapted to IFRS, a number of differences remain. Intrum Justitia will monitor developments continuously in order to accommodate the new rules. Based on what is now known, the only major differences between the current accounting principles and IFRS regard the reporting of acquisitions and goodwill, the reporting and valuation of pensions, and financial instruments. The new rules for reporting of pensions will be applied as of 2004. The company is of the opinion that the change will have a negative impact on equity, though no more than SEK 10 M. Intrum Justitia will provide more detailed infor-mation on the effects on the company's reporting in 2004 as it becomes available. Reporting Dates The Annual Report is scheduled for publication and distribu-tion to shareholders in mid-April 2004. The First-Quarter Interim Report (January-March) 2004 will be published on May 4, 2004. The Second-Quarter Interim Report (January-June) 2004 will be published on August 18, 2004. The Third-Quarter Interim Report (January-September) 2004 will be published on October 27, 2004. Stockholm, February 19, 2004 Intrum Justitia AB (publ) Jan Roxendal President & Chief Executive Officer This Full-Year Report has not been reviewed by the com-pany's auditors. This Full-Year Report and other financial information are available at Intrum Justitia's website: www.intrum.com Denna delårsrapport finns även på svenska. Presentation of the Full-Year Report Intrum Justitia President & CEO Jan Roxendal and CFO Bertil Persson will comment on the Full-Year Report at an analyst's meeting and telephone conference held today at 3:00 p.m. CET. Location: Operaterrassen in Stockholm, Sweden. To participate by telephone, call +44 207 162 0184. A recorded version will be available through February 26 by telephone: +44 208 288 4459 using the code 587 322. For further information, please contact: Jan Roxendal, President & CEO Tel: +46 8 546 10 200 Bertil Persson, Vice President & CFO Tel: +46 8 546 10 200 Anders Antonsson, Investor Relations Tel: +46 8 546 10 206, mobile: +46 703 36 78 18 Intrum Justitia AB (publ) SE-105 24 Stockholm Sweden Tel: +46 8 546 102 00, fax: +46 8 546 10 211 www.intrum.com E-mail: ir@intrum.com Swedish corporate identity no: 556607-7581 This interim report is a translation from a Swedish original. In the event of any differences between this translation and the Swedish original, the Swedish version shall govern. Intrum Justitia is Europe's leading credit management services group. The group has revenues of SEK 2.8 billion and has about 2,900 employees in 21 European countries. Intrum Justitia's objective is to be a leading provider of CMS in Europe through excellence in local client care, ledger administration and debt collection and by measurably improving clients' cash flow and long-term profitability. The group offers efficient high quality management of commercial and consumer receivables in all phases in the CMS process. Intrum Justitia has a growth strategy and aims to take active part in consolidating its industry. Intrum Justitia is listed on Stockholmsbörsen, the Stockholm Exchange, ticker IJ. For more information, please visit www.intrum.com ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2004/02/19/20040218BIT20690/wkr0002.pdf Download complete version of Full-year report (pdf)

About Us

Intrum is the industry-leading provider of Credit Management Services with a presence in 24 markets in Europe. Intrum helps companies prosper by offering solutions designed to improve cash flows and long-term profitability and by caring for their customers. To ensure that individuals and companies get the support they need to become free from debt is one important part of the company’s mission. Intrum has more than 8,000 dedicated and empathetic professionals who serve about 80,000 companies across Europe. In 2017, pro-forma revenues amounted to SEK 12.2 billion. Intrum is headquartered in Stockholm, Sweden and the Intrum share is listed on the Nasdaq Stockholm exchange. For further information, please visit www.intrum.com.


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