Collection Giant Intrum Justitia Sees Earnings Slip into Red on England Activities

Consolidated revenues for the full-year 2003 amounted to SEK 2,864.6M ($392 million) compared with SERK 2,774.9M in 2002, an increase of 3%. Organic growth accounted for 3 percentage points, with 4 percentage points from acquisitions (Stirling Park in Scotland and the French enterprises Jean Riou Contentieux and Cofreco). The appreciation of the Swedish krona generated –4 percentage 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 ($58.5 million) as a result of the downward earnings trend in England, Switzerland 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 (-$12.8 million).

Earnings before tax and minority interests for January–December amounted to a deficit of SEK –146.8 M. Net earnings for the year were SEK –180.2 M.

Earnings per share for the full-year amounted to a deficit of SEK –2.12.

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 Switzerland, 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 telecom 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 Netherlands, 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 migration of a production system in Sweden also affected earnings 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 information and credit guarantee operation, which also affected earnings for the service line to some extent.

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.